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EarthLink shareholders will receive 0.818 Windstream shares for
each share they own.
The deal values EarthLink at about $645.2 million or $5.92 per
share, based on Windstream's Friday closing price, according to
Reuters calculations. EarthLink had about $436 million in gross
debt as of Sept. 30.
Shares of Windstream were up 3.6 percent at $7.50 in premarket
trading, while EarthLink's were up 1.1 percent at $6.29.
Windstream's offer price is at a 9.2 percent premium to
EarthLink's Thursday close, before Reuters reported that the
companies were in talks to merge.
Both Little Rock, Arkansas-based Windstream, which provides
telephone and Internet services to consumers in rural markets,
and Atlanta-based EarthLink, which was an Internet pioneer in
dial-up service in the 1990s, have seen revenue fall for the
past three years.
The deal, when closed, is expected to generate over $125 million
in cost synergies within three years, the companies said.
Windstream shareholders will own about 51 percent of the
combined company when the deal closes, while EarthLink
shareholders will own about 49 percent, the companies said.
The merger comes as CenturyLink Inc last month agreed to buy
Level 3 Communications Inc in a deal valued at about $24
billion, with CenturyLink keen to expand its reach in a crowded
market that provides communications services to businesses.
J.P. Morgan was Windstream's financial adviser, while Goldman
Sachs advised EarthLink.
(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sai
Sachin Ravikumar)
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