Windstream Holdings, Inc. and EarthLink Holdings Corp. have agreed $673 million all-stock merger, bringing together the two service providers in an attempt to cut costs as revenues decline.
As part of the deal, shareholders of Earthlink will receive 0.818 shares of Windstream for each EarthLink share owned. Based on closing market prices on Friday, EarthLink stock is valued at $5.92, a 9% premium to Earthlink’s closing price of $5.42 on November 3 prior to the announcement of talks being reported however below Friday’s closing price of $6.22.
Windstream is a provider of broadband, voice and cloud computing services and said it expects to issue around 93 million new shares as part of the merger.
According to the companies the agreement is valued at $1.1 billion including debt.
EarthLink CEO Joe Eazor announced their merger in the company’s quarterly update on Monday:
“We are also excited to announce that we have signed a definitive agreement to merge with Windstream in an all-stock transaction valued at approximately $1.1 billion that will create a stronger, more competitive company. We look forward to partnering with Windstream upon the close of the transaction in the first half of 2017 and capitalizing on this outstanding strategic fit.”
On completion of the merger during H1 of 2017, Windstream investors will hold 51% of the new combined company whilst EarthLink investors will hold 49%.
It is thought by the service providers that the scale of the company will allow it to compete in the current competitive market and streamline the business through cost reductions expected to amount to $125 million each year.
Windstream issued its quarterly results on Monday also and reported a drop in revenue and sales of 10% to $1.34 billion, causing it to post a larger net loss of $66.2 million, or 72 cents per share, in comparison to $7.2 million, or 8 cents per share last year.
EarthLink also announced its results with a similar trend of seeing sales fall by 13% to $270.9 million. The business reported a loss of $10.5 million swinging from a profit of $230,000 last year.
The new merged business will keep the Windstream name.