XO Communications was selected Friday as the winning bidder for a majority of the assets of Allegiance Telecom and its subsidiaries.
Under the terms of the transaction, XO will purchase the Allegiance assets for $311 million in cash and 45.38 million shares of XO common stock.
The parties expected to finalize the agreement by the end of next week.
With the acquisition, XO will become the nation's largest independent provider of national local telecommunications and broadband services. Early predictions have indicated that the company will grow to include more than 330,000 customers and more than $1.6 billion in revenue.
Carl Grivner, CEO of the Reston, Va.-based XO, said that after the acquisition is complete, his company will boast the largest network of nationwide connections to regional Bell operating company (RBOC) networks, and will essentially double the points of presence (POPs) within the 36 markets where both XO and Allegiance operate.
"The combination of XO and Allegiance is good for both the industry and businesses," Grivner said. "It will give businesses more choices for their end-to-end telecommunications needs."
The deal between XO and Dallas-based Allegiance leaves XO competitor Qwest Communications out in the cold. Just last month, Qwest confidently announced its intentions to add the very same assets to its network.
When asked to comment on the XO-Allegiance deal, Clare Maledon, a spokeswoman at Denver-based Qwest, said that her company simply had second thoughts.
"Qwest takes a disciplined and focused approach to these types of activities, and after careful analysis, we determined that we would discontinue bidding for the assets," she said. "We continue to focus on delivering our customers excellent service and quality products."
Through the pending deal, XO will acquire all of Allegiance's assets except for the customer premise equipment sales and maintenance business, its managed modem business and certain other assets and operations.
The acquisition is subject to final approval from the U.S. Bankruptcy Court for the Southern District of New York.
