Consolidation of fibre networks continues in the US as Windstream and EarthLink have agreed to merge in an all-stock transaction valued at about $1.1 billion, including debt. The combined company will have an extensive national network footprint spanning 145,000 fibre route miles.
This latest deal was announced one week after CenturyLink’s $34 billion acquisition of Level 3 (see CenturyLink and Level 3 confirm $34B megamerger).
Under the terms of the agreement, EarthLink shareholders will receive 0.818 shares of Windstream common stock for each EarthLink share owned. Windstream shareholders will own about 51 per cent and EarthLink shareholders will own approximately 49 per cent of the resulting company, which will retain the Windstream name.
The companies are looking for increased scale and scope giving them the ability to offer customers an expanded range of products and services including network connectivity, managed services, voice, internet and other value-added services. Customers will also benefit from combining Windstream’s scale in the Enterprise segment and EarthLink’s successful launch of SD-WAN.
“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 chief executive officer 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.”
After the deal closes, Tony Thomas will continue in his role president and chief executive officer of the combined company and Windstream’s Bob Gunderman will serve as its chief financial officer. The combined company will be headquartered in Little Rock, Arkansas.
At that time, Windstream intends to refinance EarthLink's gross debt of approximately $436 million.
The companies have also identified more than $125 million in cost savings that they expect to achieve within 36 months of closing, which is expected to happen in the first half of 2017, subject to the usual conditions and approvals.