Windstream Holdings, Inc. (NASDAQ:WIN) announced on Monday they are going to buy EarthLink, another telecommunications company in the US. The deal is worth $1.1 billion, and this includes debt too. Reuters had reported only last week that the two businesses were in talks about a possible merger. Windstream is based out of Little Rock in Arkansas, whereas EarthLink operates from Atlanta in Georgia.
This is the latest merger news coming from the telecom sector. Last month, CenturyLink inked a deal to purchase Level 3 Communications. That deal was valued at $24 billion. With this acquisition, CenturyLink will now be able to expand their reach.
Windstream to Become More Competitive After the Merger
The merger will help Windstream reduce their operating costs, which will help them compete better with their business rivals. The telecom market has intense competition, and any little edge helps. The new business will combine the scale of Windstream in the enterprise sector, with the SD-WAN services of EarthLink. Windstream will now get a 145,000 fiber route miles footprint, which includes important US routes in the Northeast and Southeast.
Additionally, it was also revealed that the company says will generate more than $125 million towards cost synergies in just three years.
Revenues of both the businesses have been falling in recent times. Windstream provides internet and telephone services to the rural markets. EarthLink, on the other hand, was a pioneer in dial-up service till the middle of the 1990s.
The Windstream-EarthLink Merger Agreement
According to the deal, EarthLink (NASDAQ:ELNK) has been valued at $645.2 million, which comes to $5.92 for each share of the business. It has been based on the stock’s Friday closing price. As of September 30, EarthLink has a gross debt of $436 million. It has been decided that after the takeover, all EarthLink shareholders are going to receive 0.818 stocks of Windstream for each stock they have. The offer price made by the business is at a premium of 9.2 percent over the Thursday’s closing price of EarthLink.
Shareholders of Windstream (NASDAQ:WIN) will own 51 percent of the combined business once the deal closes, while EarthLink shareholders will have about 49 percent.
It seems investors are positive about this deal. The Windstream stock went up by 3.6 percent in premarket trading on Monday. The EarthLink stock was also up by 1.1 percent. It was trading at $6.29. However, EarthLink’s stock actually went down sharply on Friday by 6.4 percent.