Early on Monday, the board of directors of both Windstream Holdings Inc (Nasdaq: WIN) and EarthLink Holdings Corp (Nasdaq: ELNK) announced the unanimous approval of the merger of the two companies; an all-stock transaction valued at roughly $1.1 billion.
Under this agreement, Earthlink shareholders can expect to receive 0.818 shares of Windstream common stock for every single Earthlink share they own. Furthermore, this ratio represents an impressive 13 percent premium over the average exchange ratio of 0.721 over the previous month (which ended on November 3). Accordingly, Windstream expects to issue roughly 93 million shares of stock—with an approximate value of $673 million—based on the closing stock on November 4. When the transaction closes, Windstream shareholders will be own 51 percent of the newly combined company and Earthlink shareholders will own about 49 percent.
“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,” explains Windstream president and chief executive officer Tony Thomas, president. “With this transaction, we are combining two highly complementary organizations 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.”
Once the transaction is complete, the new company will have a larger scale and more scope to provide with a better ability to leverage best practices across a more broad platform to help them offer customers more products, more services, and better enterprise solutions. For example, the combination will now have 145,000 fiber route miles for telecom customers.
“We are pleased to join forces with a company that shares our core values and operating philosophies, and whose strategy complements our own,” comments EarthLink Chief Executive Officer and President Joe Eazor. “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. We look forward to working with the Windstream team to better serve our customers in a world that is becoming more network-centric every day.”