EarthLink, an IP infrastructure and services company, has signed a definitive merger agreement under which it will acquire One Communications for $370m, which includes payment of approximately $285m of One Comm net debt.
As per the agreement, One Comm stockholders will have the right to elect to receive the net merger consideration in the form of cash or EarthLink common stock.
The transaction purchase price represents a multiple of approximately 3.7x Adjusted EBITDA for the 12 months ended 30 September 2010, including $20m in expected cost synergies and excluding one-time transaction costs.
The agreement provides for EarthLink’s acquisition of One Comm by means of a merger of a newly formed indirect subsidiary with and into One Comm, with One Comm surviving as an indirect wholly owned subsidiary of EarthLink.
EarthLink said that the acquisition will provide it with a strong IP network footprint in the Northeast, Midwest, and Mid Atlantic regions; and a solid foundation for potential future acquisitions of revenue bases in the region.
The acquisition will also provide overlapping connection cities with EarthLink Business (formerly Deltacom) long-haul routes in major markets including Washington, DC, Baltimore, Philadelphia and New York City.
Geographical expansion and scale for managed IP services product strategy supported by a talented One Comm employee base are also some of the merits EarthLink will get from the acquisition.
EarthLink plans to integrate One Comm into its newly established EarthLink Business division, which currently consists of products and capabilities of its former New Edge Network, Deltacom and EarthLink Business Solutions divisions.
With the completion of this transaction, EarthLink Business will operate a nationwide IP network with underlying fibre assets in 30 of the top 50 MSAs in the country.
US-based One Comm is a privately held, multi-regional integrated telecommunications offerings provider with approximately 1,500 employees and serves business customers in 17 states across the Northeast, Mid-Atlantic and Upper Midwest.
EarthLink chairman and CEO Rolla Huff said that they will now have a fibre-based IP network that covers a substantial portion of the key business markets across the eastern half of the US, as well as substantial revenue and EBITDA scale in our strategic line of business.
One Comm’s shareholders will retain liability for all costs relating to One Comm’s pending litigation with Verizon New York.
