Windstream, EarthLink To Join Forces In $1.1B Merger

Two more telecom providers are officially joining forces. Windstream and EarthLink plan to merge to create a joint company with a large national footprint in a $1.1 billion transaction, the two companies said Monday.

Via the terms of the deal, Windstream and EarthLink are coming together in an all-stock transaction, valued at $1.1 billion, included debt. Windstream shareholders will own approximately 51 percent of the new company, while EarthLink shareholders will own approximately 49 percent. The transaction has been unanimously approved by both companies' boards of directors, the service providers said.

The two companies officially announced the merger during a joint conference call Monday morning, following reports that they were in advanced merger talks late last week.

[Related: Report: Windstream, EarthLink In Advanced Merger Talks]

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The combined telecom provider will have a nationwide fiber footprint of 145,000 route miles, which includes strategic routes located across the Southeast and Northeast U.S. The company will have an expanded portfolio of products and services, and will be able to offer enhanced enterprise solutions due to the combination of Windstream's reach within the enterprise customer segment and EarthLink's SD-WAN portfolio, the two companies said.

’With this transaction, we are combining two highly complementary organizations with closely aligned operating strategies and business unit structures," said Tony Thomas, president and CEO of Little Rock, Ark.-based Windstream.

The two companies also announced fiscal third-quarter 2016 results during the call.

Windstream reported revenue of $1.34 billion in third-quarter 2016, down from $1.50 billion in the year-ago period. Operating income also dipped from $179 million to $129 million year over year. Atlanta-based EarthLink reported revenue of $235.1 million for third-quarter 2016, down about 13 percent from $270.9 million in third-quarter 2015.

"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," said Joe Eazor, EarthLink's president and CEO, in a statement.

Windstream's Thomas will stay on as president and CEO of the new company, while Windstream CFO Bob Gunderman will remain on as CFO of the new company. In its joint statement, the two companies said that "key EarthLink management" is expected to join the new company. The new company will have 12 members on its board of directors, with three existing EarthLink directors joining the new board.

The telecommunications market has been busy with merger and acquisition news over the past month. Dallas-based AT&T said it plans to buy media giant Time Warner, and Monroe, La.-based CenturyLink also revealed its plans to merge with Broomfield, Colo.-based service provider Level 3 in late October.

But even though the Federal Communications Commission will undoubtedly have its hands full evaluating acquisitions, both Windstream and CenturyLink said that there is "a lot of public interest in bringing these two companies together" during its conference call on Monday. The two service providers pointed to a larger network that would make the combined company more competitive, as well a better credit profile for the joint company, executives for both companies said.

Windstream and EarthLink said they expect the deal to close during the first half of 2017.