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Baby Bell US West merged with broadband Internet company Qwest Communications in late June. The $43.5 billion deal was approved by the US Federal Communications Commission (FCC) in March with the stipulation that Qwest sell its long distance business within US West's 14-state region. That business will be sold to Touch America for $200 million. Donaldson Lufkin & Jenrette (DLJ) was advisor for Qwest on the transaction.
The all-stock transaction will be accounted for as a purchase and is tax-free to US West stakeholders to the extent of the Qwest stock delivered in the transaction. For accounting purposes only, US West will be deemed the acquirer and its assets and liabilities will be brought forward at net book value.
Steve Shook, analyst at Wachovia Securities, notes, "The merged company will try to get back in the long distance market whether it takes six months or three years. The idea will be to become a single service provider."
The deal reflects the changing US telecoms landscape, and the advent of a larger potential acquisition target. Qwest successfully emerged from a highly contested battle with rival Global Crossing for US West last July. The deal between Qwest and US West was structured in less than a year. The new...