Windstream Holdings said Monday it had pulled the trigger on a $1.1 billion all-stock deal, including debt, to merge with fellow ISP EarthLink, reasoning that the deal will give Windstream a national footprint spanning about 145,000 fiber route miles, including “strategic routes” in the Southeast and Northeast U.S
Under the deal, EarthLink shareholders will receive 0.818 shares of Windstream common stock for each EarthLink share owned, representing a 13% premium to the average exchange ratio of 0.721x over the month ended Nov. 3, 2016, the most recent unaffected trading day. Windstream expects to issue approximately 93 million shares of stock valued at approximately $673 million, based on the company’s closing stock price on Nov. 4, 2016. Windstream shareholders will own about 51% of the combined company, with EarthLink shareholders owning the rest.
They expect the deal to create annual operating and capital expenditure synergies of more than $125 million.
They expect the deal to close in the first half of 2017, with Tony Thomas to serve as president and chief executive officer of the combined company and Bob Gunderman serving as chief financial officer of the combined company.
The combined company will keep the Windstream name and remain headquartered in Little Rock, Ark.
EarthLink, a pioneering ISP going back to when dial-up was the primary connection point, had sought a wholesaling condition on the Comcast-NBCU merger. It was also a strong advocate for multi-ISP conditions to be placed on the 2000 AOL-Time Warner merger.
The bulk of EarthLink’s revenues now comes from the enterprise/mid-market and small business sectors. EarthLink posted Q3 revenues of 235.1 million, down 13.2% year-over-year. About $47.8 million of the Q3 total came from consumer services.
EarthLink ended Q3 with about 427,000 “narrowband” subscribers, and 244,000 broadband subs.