Windstream and EarthLink Announced to Combine in an $1.1 Billion Deal

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On Monday, Windstream Holdings, Inc. (NASDAQ:WIN), a telecommunications and data services firm, announced a merger with its rival, EarthLink Holdings Corp.

EarthLink Holdings Corp. (NASDAQ:ELNK), in a $1.1 billion transaction including debt. The combination of the two telecom firms aims to cut costs amid the dropping revenue, and be more competitive in the market.

The deal is expected to be closed in the first half of 2017, after that, shareholders of Windstream will own 51% of the combined company, and shareholders of EarthLink will own 49% of the firm. The combined company will keep the Windstream name. In the deal, Windstream Holdings will buy EarthLink in $673 million all-stock transaction. Shares of EarthLink was valued at $5.92 per share, which is a 9% premium to the price on the day before announcing talks of the deal.

Windstream expressed that it would issue around 93 million shares for the transaction, while EarthLink would provide cloud networking and also other network services. Both of the companies believed that the new combined company will provide leverage to compete, after reducing more than $125 million in operating and capital expenses.

The merger came after the two companies reporting their earnings. For the September quarter, total revenue of Windstream dropped 10% to $1.34 billion. Net loss in the latest quarter was $66.2 million, which is $0.72 per share, more than the loss of $7.2 million, or $0.08 per share in the same period last year. For EarthLink, in the latest period, the sales dropped 13% to $270.9 million, and net loss was $10.5 million.

Shares of Windstream increased 3.6% to $7.5 per share in premarket trading, and shares of EarthLink rose 1.1% to $6.29 per share. In the deal, J.P. Morgan worked as Windstream’s financial adviser, while Goldman Sachs worked and financial adviser of EarthLink.

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