Level 3 has agreed to buy TW Telecom, a business Internet provider, for $5.68 billion in cash and stock.
The fiber cable and connectivity giant will pay $10 a share in cash, along with a mix of stock, it said in a statement on Monday. In total, the deal will go ahead for $40.86 a share, around 12 percent above TW Telecom's closing price as of Friday.
Level 3 will also acquire $1.6 billion in debt from TW Telecom.
The company said it expects to incur integration costs of about $170 million, but save $2 billion in the long run.
The acquisition, which is subject to approval by regulators, will significantly bolster Level 3's presence in the U.S. connectivity market.
TW Telecom's senior vice president of network and information technologies Harold Teets said the agreement will support "high-quality service for our respective customers, and will keep the backbone cost burden balanced between our two networks."
The deal will be a boon for Level 3, which already provides fiber cables across the U.S., and through submarine fiber cables that connect the U.S. to the rest of the world. Its major customers include Google and Netflix, in which the company provides privately rented fiber cables between its datacenters.
However, trust was shaken in the telecoms market — particularly Level 3 — following the release of the Edward Snowden leaks late last year, in which the National Security Agency's MUSCULAR program allowed the intelligence agency to tap into fiber cables between datacenters.
The New York Times, which published the story in conjunction with The Guardian, noted the provider of one of the cable's used in the NSA's datacenter link tapping activities was Level 3.
The cable provider responded with a non-descript statement, which failed to directly deny assisting the U.S. government with its intelligence gathering activities.
Level 3 said the acquisition should complete, barring any hiccups, by the end of the year.