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The story behind CenturyLink's CEO succession plan

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The story behind CenturyLink's CEO succession plan

As the merger between CenturyLink Inc. and Level 3 Communications Inc. moves closer toward completion, investors are getting a better sense of what the combined company will look like going forward.

In particular, the two companies outlined a clear executive succession plan on June 1, saying that Jeffrey Storey, president and CEO of Level 3, will join CenturyLink as its president and COO when the merger closes. In a couple of years when CenturyLink's current CEO, Glen Post III, retires, Storey will take over the chief executive role, effective Jan. 1, 2019. Post will then serve as executive chairman of the company's board.

Notably, this is the succession plan that had previously been touted by activist shareholder Keith Meister, founder of Corvex Management hedge fund. In May, Meister gave a presentation at the Sohn Conference in New York during which he discussed the myriad opportunities he saw ahead after the merger. In a Schedule 13-D summarizing the presentation, Meister described these opportunities as "transformational" and "unprecendented," noting the combined companies would be able to "drive significant free cash flow" and secure future dividend payments. In addition, according to a CNBC writeup of Meister's remarks at the conference, he expects the combined company to generate $10 billion of annual EBITDA and $3 billion in free cash flow.

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However, Meister also noted in his filing that it was "critical to the success of the combined company" that Post, who has served as CEO of CenturyLink for 25 years, and Storey, who has served as CEO of Level 3 for four years, have senior executive roles at the combined entity as of the closing of the deal. He laid out a succession plan very similar to the one announced by the two companies June 1.

At the time of the filing, Meister reported beneficial ownership of 29,998,645 shares in CenturyLink, representing a 5.5% stake of the company's common stock. According to CNBC, Meister said CenturyLink represents Corvex's "biggest position," adding that he sees the stock as "cheap on both [an] absolute and relative basis."

On June 1, after CenturyLink and Level 3 announced the succession plan, shares in the former company closed at $25.87, up from a prior-day close of $24.95. Shares in Level 3, meanwhile, closed at $61.86, up from a close of $59.52 a day earlier.

Elsewhere in the media and communications industry, TiVo Corp. shares saw positive movement during the week ending June 2. The stock closed the week at $17.90, up from a May 26 close of $16.40.

The company said in a May 30 SEC filing that an administrative law judge in the U.S. International Trade Commission issued a preliminary ruling station that Comcast Corp., along with other respondents, violated two of TiVo's patents.

Tivo, through its 2016 combination with Rovi Corp., has been locked in a patent dispute with Comcast for some time. In 2016, Rovi accused Comcast, together with its set-top box suppliers, of infringing on 14 U.S. patents covering features that help Comcast implement remote recording, AnyRoom DVR and X1 search. Comcast responded with a countersuit accusing the company of breaching its licensing agreement.

Variety noted May 30 that the preliminary ITC ruling will not necessarily impact the U.S. court case, which is separate. Nevertheless, the publication cited an analyst note from B. Riley & Co.'s Eric Wold saying that the ITC decision was "a positive step towards resolving the Comcast dispute" and gives Tivo the upper hand. In particular, the analyst noted the ITC decision could prompt Comcast to agree to a settlement "in order to avoid potential treble damages from an adverse District Court ruling."

One stock that saw a major drop during the week ending June 2, meanwhile, was TEGNA Inc. — though the drop came for a clear reason. On June 1, TEGNA completed the spinoff of Cars.com, making the digital platform for car buyers and sellers its own publicly traded company. TEGNA stockholders retained their TEGNA shares and received one share of Cars.com for every three shares of TEGNA stock they owned as of May 18.

At the same time, Gracia Martore, former president and CEO of TEGNA, retired and stepped down from the board. Dave Lougee succeeded Martore as president, CEO and as a board member.

Shares in TEGNA closed June 1 at $15.35, down from a May 31 close of $23.74.