Atlanta-based Internet service provider EarthLink, a high-flying company in the early days of the dial-up web, has agreed to be purchased by rival Windstream in a $1.1 billion deal including debt, the companies announced on Monday.
The deal, expected to close in in the first half of next year, is designed to make the combined company a bigger player to better compete in the broadband, phone, cable and cloud networking segments. The merged company will be called Windstream and will be based in Little Rock, Ark.
Windstream said it will issue new shares valued at $673 million, with holders of EarthLink stock receiving 0.818 shares of Windstream stock for each EarthLink share. Windstream shareholders will control 51 percent of the combined company.
The companies said they anticipate cost savings, which will likely involve job cuts, of $125 million a year.
Information about potential job cuts was not immediately known.
In an email, EarthLink spokesman Jeff Crow said in an e-mail: “How this merger affects specific employees or locations is not decided at this time.”
“An integration team comprises of cross functional representatives from both companies will work collaboratively over the weeks ahead to determine the best path forward for the combined company,” he said.
EarthLink was founded in Pasadena, Calif., and rose to the top ranks of dial-up providers behind AOL when it acquired Atlanta-based MindSpring in 2000 in a $3 billion deal. The combined company took on the EarthLink name, but based itself in Midtown.
The company was eventually pummeled by AT&T and cable companies such as Comcast that had a ready base of customers and the infrastructure to provide broadband service. Earthlink continued offering dial-up service for years but eventually bought its way into the broadband business and beefed up offerings to businesses.
Earthlink said Monday its revenue in the third quarter was $235.1 million, down 13.2 percent compared to the same period a year ago. The company said its net income was $200,000, compared to a $10.5 million loss a year ago.
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