Windstream announced a deal to purchase Earthlink in an all-stock merger that is valued at about $1.1 billion including debt. The deal is expected to close in the first half of 2017.
The combined company would have a significant fiber footprint that combines EarthLink’s 29,000 route miles with Windstream’s fiber footprint for a total of 145,000 route miles.
In addition, the merged company will be able to offer Earthlink’s software-defined wide area networking (SD-WAN) services that the company debuted earlier this fall to Windstream’s enterprise customers.
Earthlink is using VeloCloud’s SD-WAN gear to deliver network access, hosted voice, security, and other SD-WAN services. Although the ISP only launched the service in September, during the company’s third quarter earnings call today, it said it has already closed multiple SD-WAN deals including an agreement with TGI Friday’s to provide SD-WAN service to more than 400 restaurants.
Earthlink shareholders would receive 0.818 shares of Windstream stock for each Earthlink share owned. Earthlink’s stock is valued at $5.92 a share. Windstream, meanwhile, said it would issue about 93 million shares valued at about $673 million to complete the deal.
When the deal closes, Windstream shareholders would own about 51 percent of the company, and Earthlink shareholders would own about 49 percent. The merger must be approved by the FCC and the boards of both companies.
Tony Thomas, Windstream’s CEO, would remain CEO of the combined company, and Bob Gunderman, Windstream’s CFO would remain CFO. Key Earthlink management team members are also expected to join Windstream.
Both Windstream and Earthlink have both been undergoing transformations over the past few years.
Windstream in 2011 spun off some of its assets into a publicly traded real estate investment trust (REIT).
Earthlink, meanwhile, has expanded its customer base through its purchases of competitive carriers such as New Edge Networks.
Windstream’s acquisition of Earthlink is the latest example of consolidation in the telecom space. Last week CenturyLink announced it was buying Level 3 Communications in a cash and stock transaction with an equity value of about $24 billion, or $34 billion if the assumption of debt is included.