Buffett joins Level 3 investors
Published: 08 Jul 2002 14:52 BST
Network operator Level 3 Communications is selling $500m in debt to three institutions in a move that could presage a new round of consolidation in the networking industry.
Warren Buffett's Berkshire Hathaway will acquire $100m of the 10-year convertible notes. Longleaf Partners Funds is acquiring $300m of the notes. Legg Mason is buying the remaining $100m. The notes pay 9 percent cash interest and can be converted into common stock for a $3.41 per-share fee.
The investment is unusual for Buffett, the Berkshire Hathaway chairman who has long eschewed investments in technology stocks.
Level 3 provides a range of services, such as maintaining the dial-up modem banks that America Online customers use to connect to the Internet and serving up bandwidth to corporations and other network operators over its fibre-optic network.
The company, which has spent billions of dollars on a 20,000-mile network through much of North America and parts of Europe, reaped the benefits of runaway investment in fibre optics during a late-1990s telecom boom.
Level 3 said it would use the cash raised for general corporate purposes, including "potential acquisitions relating to industry consolidation opportunities, capital expenditures and working capital."
"It is widely recognised that the telecommunications industry is going through a period of unprecedented turmoil," chief executive James Crowe said on Monday in a statement. "At the same time, however, the ongoing shakeout is creating extraordinary opportunities, as telecommunications companies, their network assets and customer bases become available."
Crowe, a telecommunications veteran who made a fortune building and selling other networks, has spearheaded Level 3's new strategy of combining its sprawling network with two powerhouses of software distribution -- CorpSoft and Software Spectrum.
With the extra cash, Level 3 could help consolidate telecom providers, which are struggling amid excess network capacity.
Have your say instantly, and see what others have said. Go to the ZDNet news forum.
Let the editors know what you think in the Mailroom.
Did you find this article useful?
47 out of 93 people found this useful
Digg
Slashdot
Del.ici.ous
Stumble
Reddit
