Last Friday, the FCC and the Justice Department approved Level 3 Communications'
First of all, with the click of a calculator, its stock price will increase via a 1-for-15 reverse stock split. Whoop-de-doo ... At least it gets it out of penny stock range. Oh, and the combined company will keep Level 3's ticker symbol but move its listing from the Nasdaq to the NYSE. This is to be effective Oct. 20, according to the company's news release.
What benefits will stockholders receive?
The word "synergy" has been used to describe the advantages of many corporate couplings. Level 3 uses a form of it multiple times in its announcement, including saying it expects to achieve "Total synergies ... [to increase EBITDA by $300 million] ... within 18 months."
And, that the company also expects the merger to improve its "... credit profile and reduce the company's financial leverage from approximately 6.8x net debt to [2010 adjusted EBITDA ] to approximately 4.4x after realization of expected synergies."
These are "expectations," of course, so all that remains to be seen.
Another synergistic effect of the merger is the departure of Global Crossing's CEO, John Legere, and his $4,696,871 total compensation package for 2010. But is that a fitting reward for the person who oversaw Global Crossing's rebirth after its near-demise almost 10 years ago? Oh well, Level 3 CEO James Crowe is still around with his total 2010 compensation of $6,398,268.
If you really wanted synergies, though, wouldn't you get rid of the more expensive executive? That's usually what happens to "redundant" middle management -- and what is in fact going to happen to hundreds of mostly American workers, according to Crowe.
Could I be more sarcastic?
To say that Level 3 has had a hard time turning a profit would be understating it; the company has lost money 10 out of the last 10 years. And Global Crossing hasn't done much better, failing to make a profit since 2003 -- the year it came out of bankruptcy after overexpanding at the time of the dot-com collapse.
(A vitriolic disclosure: Unfortunately, I was one of those original Global Crossing stockholders. To those pre-bankruptcy holders of General Motors
Do the math
At least AT&T's
Fool contributor Dan Radovsky owns shares of AT&T and has gotten over most – but not all – of his early investing disappointments. Motley Fool newsletter services have recommended buying shares of AT&T and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.