Windstream and EarthLink in $1.1bn merger deal

By:
Alan Burkitt-Gray
Published on:

US operators WindStream and EarthLink have agreed an all-share deal to merge

US carriers Windstream and EarthLink are to merge in an all-stock deal valued at $1.1 billion. Windstream’s existing shareholders will own 51% of the combined company.

The merged company – which will be called Windstream, and will be based at Windstream’s existing headquarters in Little Rock, Arkansas – will have a US-wide footprint spanning approximately 145,000 fibre route miles.

“The combination with EarthLink further advances Windstream’s strategy by creating a stronger, more competitive business to serve our customers while increasing free cash flow and reducing leverage,” said Tony Thomas, president and CEO at Windstream.

“With this transaction, we are combining two highly complementary organisations with closely aligned operating strategies and business unit structures. We look forward to working with the talented EarthLink team to create significant benefits and drive value for all of our stakeholders.”

EarthLink CEO and president Joe Eazor said: “In our work with Tony and his team, it’s become clear that we are two companies on parallel paths. We’ve both made significant progress as evidenced by our improving financial results and strengthening balance sheets. Now is the right time for us to come together.”

The companies said they expect operating and capex synergies of more than $125 million a year.

Under the terms of the agreement, EarthLink shareholders will receive 0.818 shares of Windstream common stock for each EarthLink share owned. This ratio represents a 13% premium to the average exchange ratio of 0.721x over the month ended 3 November 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 4 November. Upon closing of the transaction, Windstream shareholders will own 51% and EarthLink shareholders will own 49% of the combined company.

After the transaction closes, Thomas will be president and CEO and Bob Gunderman will serve as CFO of the combined company. Key EarthLink management members are expected to join the combined company, but the companies gave no details.

Three of EarthLink’s existing directors will join the current Windstream board of directors, bringing the total number of directors of the combined company’s board to 12.