Internet services provider Level 3 Communications Inc. (LVLT) on Monday agreed to acquire privately held TelCove Inc., a regional telecommunications company, for about $1.08 billion in cash and stock.

Level 3, of Broomfield, Colo., will pay $637 million in shares and $445 million in cash. Level 3 would also assume $155.5 million in TeleCove debt in the deal.

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The number of shares issued to cover the stock portion of the deal will be between 111 million and 166 million, depending on Level 3's average share price in a period prior to closing. The company had 821.9 million basic shares outstanding at the end of the first quarter.

Pennsylvania-based TelCove has annual revenue of about $390 million, Level 3 said, adding it expects that revenue to increase annually by about 10 percent to 12 percent, with gross margins of more than 80 percent.

Level 3 expects to book integration costs of about $75 million, primarily in 2007.

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