Limelight and Level 3 Expected To Make Joint Announcement Soon

Over the past 24 hours, some Wall Street money managers have been calling me saying they are hearing that Level 3 and Limelight will soon make a joint announcement regarding both company's CDN business. I have been hearing the same thing and expect the news will come out shortly, maybe even tomorrow. Back in August I reported that Limelight was in discussions to work with Level 3 to potentially merge their CDNs businesses and work with one another to sell CDN and value add services. The companies have been speaking since the summer and while various options were looked at, it appears that both companies have now settled on a deal, which I originally heard was suppose to come out today. Maybe it will be after the market closes or will come out tomorrow, but an announcement is imminent and it will not be an acquisition, but rather some kind of partnership.

Since I don't know all of the exact details on how the deal will be structured, I'm not going to release only partial info on what I have heard and will let both companies share the full details themselves. But with the news expected to hit shortly and Limelight reporting earnings on Monday, I expect we'll hear a lot more about this very soon. I've already outlined how a deal like this could help both companies, but until a deal is officially announced and we know exactly what the structure of the deal looks like, it's still too early know how this will impact the CDN market in the near-term.

Comments

[schmuckinsurance]

Not to be the skeptic Dan, but it would surprise me if LL was willing to partner on their business without a large cash payment. Coincidentally or not L3 has the most cash on hand I can remember at ~950M.

I guess it is possible LL could get access to the L3 customers to sell VAS and turnover the capital intensive biz to L3 but how does the standalone LL handle that type of expense deleveraging? Said another way, can turning over all of that LL CDN revenue(even if it has a royalty attached) for the promise of a potential upsell keep the lights on in Arizona? And when you think about the 2 large investors(37%) who had stated intentions for liquidity at $8 but balked at the $7 price, is a partnership consistent with that end?

I know L3 does not want to part with their cash during this refi wave but I must be missing something if Dan is right and LL doesn't get liquidity.

[Judy]

There is a typo in the first paragraph "Back in August I reported that Level 3 was in discussions to work with Level 3 to potentially merge their CDNs business". Is Level 3 talking to itself?

[schmuckinsurance]

The increased L3 term loan today supports this mosaic as well.

http://www.businessweek.com/news/2011-11-03/level-3-communications-said-increase-loan-by-300-million.html

[Pandorabelle]

Dan, How does this partnership track with prior expectations of a MSFT acquisition of Limelight? Is that still in the pipeline?

[Rob Powell]

Limelight reports earnings after the close today. Seems like a likely time for them to drop any sort of bombshell of this type. Still, it's hard to tell just what sort of joint announcement we would be talking about here.

[D. Smith]

Markets are closed. Earnings are reported. No big announcement! Is Dan writing once again?

[Wayne Johnson]

Any update, Dan? Is this really going to happen or did it fizzle out?

[Mike H.]

Seconding Wayne... LLNW+LVLT talks ongoing, sputtered out, or have the sources of info just dried up with no indication either way? thanks!