CenturyLink Taps Business Telecom Veteran for CEO SuccessionBy
Jeff Storey has been the top executive at Level 3 since 2013
Companies expect to complete their merger by this fall
Level 3 Communications Inc. Chief Executive Officer Jeff Storey will become CEO of CenturyLink Inc. in 2019, a win for an activist investor who sought a telecom veteran to lead the combined operation following the companies’ $34 billion merger.
CenturyLink’s current top executive, Glen Post III, 64, will remain in his role until then and become executive chairman, according to a statement Thursday. Storey, 57, will be CenturyLink’s president and operating chief during a transition period.
The move shores up leadership ranks at CenturyLink with an executive who’s logged time at Leucadia Telecommunications Group, WilTel Communications, Cox Communications Inc. and Southwestern Bell Telephone Co. His telecom experience will be key as the company tries to challenge giants like AT&T Inc. in the market to handle heavy internet traffic for businesses.
Investors cheered the move, sending shares of CenturyLink up as much as 6.7 percent and the shares of Level 3 as much as 4 percent. The companies reiterated Thursday that they expect to close the deal by September.
Focus on Enterprise
Activist hedge fund Corvex Management LLP had pushed for Storey to succeed Post as CEO, according to Jonathan Gasthalter, a Corvex representative. Founder Keith Meister said his firm has amassed a 5.5 percent stake in CenturyLink and sees 40 percent upside in the stock as it completes the acquisition aimed at creating a more formidable competitor in the market for business telecom services.
While at Level 3, Storey was successful at integrating acquisitions, developing sales teams and identifying the key elements of corporations’ communications-infrastructure needs, said Jennifer Fritzsche, an analyst at Wells Fargo. Critically, Storey is seen as an enterprise-minded CEO.
“The enterprise side continues to be very difficult -- with a longer sales cycle and decision making processes being seen,” Fritzsche wrote in a note Thursday. The combined CenturyLink-Level 3 will be the second-largest provider of enterprise telecom services after AT&T, she noted. “Bringing in Storey could help position the new company to succeed in this challenging environment.”
Both companies have contended with growing competition from cable providers and other smaller rivals offering internet and phone connections, especially for businesses. CenturyLink, which also offers residential landline phone and internet services in cities such as Phoenix, Denver and Seattle, gets about two-thirds of its revenue from business customers.
Level 3 is one of the top U.S. providers of ethernet services, which run high-bandwidth internet connections for companies. It is also one of the biggest providers used by internet services including Netflix Inc. and Google to route traffic across the web, operations that will bolster CenturyLink’s core offerings to businesses.
Storey was promoted to the CEO job in 2013 after about five years as chief operating officer. He took a two-month medical leave last year to recuperate from surgery related to a heart condition.
If Storey leaves after the merger closes, he would get a package valued at about $26.9 million, according to data compiled by Bloomberg following the merger announcement. That includes an $8.74 million cash severance payment and $18.1 million of equity awards that would be subject to accelerated vesting. The figure doesn’t include performance shares he may have been granted in 2016 that haven’t been disclosed by the company.
With Storey in the fold long-term, Level 3 may be able to “stem the tide of additional talent leaving the company,” according to Cowen analysts Gregory Williams and Colby Synesael. In recent months, Andrew Crouch, president of Level 3’s Europe, Middle East and Africa operations, and Jack Waters, chief technology officer, have left to take roles at competitor Zayo Group Holdings Inc. As part of the succession plan, Level 3 Chief Financial Officer Sunit Patel will become executive vice president and CFO.
Level 3 employees may now “feel more comfortable in regards to vision and practice,” they wrote in a note Thursday.
— With assistance by Scott Moritz, and Beth Jinks