CenturyLink Inc. (NYSE: CTL) and Level 3 Communications Inc. (NASDAQ: LVLT) announced Monday morning that CenturyLink will acquire Level 3 in a cash and stock deal valued at $34 billion, including the assumption of debt. CenturyLink will pay $26.50 per share in cash and 1.4286 shares of stock for Level 3, and that works out to a per share price of $66.50. CenturyLink also will assume some $9 billion in Level 3’s debt.

The purchase price represents a 49% premium to Level 3’s closing price as of last Wednesday when news of the deal was reported. Upon closing, CenturyLink shareholders will own approximately 51% of the combined company.

CenturyLink CEO Glen Post said:

This transaction furthers our commitment to providing our customers with the network to improve their lives and strengthen their businesses. It is this focus on providing fiber connectivity that will continue to distinguish CenturyLink from our competitors. CenturyLink shareholders will benefit from the significant synergies and financial flexibility provided by the combined company’s revenue growth and strong cash flow. For employees, this combination will bring together two highly customer-focused organizations and provide employees growth and advancement opportunities the companies could not offer separately.

According to the announcement:

The combined company is expected to have improved adjusted EBITDA margins, revenue growth and pro forma net leverage of less than 3.7x at close, including run-rate synergies. The combined company will benefit from Level 3’s nearly $10 billion of net operating losses (“NOLs”). These NOLs will substantially reduce the combined company’s net cash tax expense over the next several years, positioning it to generate substantial free cash flow.

The cash portion of the deal will be financed with a combination of cash on hand at CenturyLink and Level 3 and about $7 billion in additional debt.

CenturyLink also expects to maintain its current annual dividend payment of $2.16 (a yield of 7.11%) as a result of improved free cash flow.

Shares of Level 3 traded up nearly 7% in Monday’s premarket session to $57.74, above the 52-week range of $41.73 to $57.59. The high was posted last week after reports of the possible merger were reported. The 12-month price target on the stock was $59.07.

CenturyLink shares traded down nearly 8%, at $28.00 in a 52-week range of $21.94 to $33.45. The 12-month price target was $29.92 before Monday’s announcement.

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