Earthlink and Mindspring to merge for 8.96 times revenue

Weekly Corporate Growth Report, Oct 4, 1999

The Deal: Earthlink Network Inc. and Mindspring Enterprises Inc. have agreed to a merger valued at $3 billion in stock. The merger will create an Internet-access company second in size to America Online Inc. The transaction will be a merger of equals. Mindspring shareholders will receive one share of stock in the combined company for each Mindspring share, while Earthlink shareholders will receive 1.62 shares for each of their Earthlink shares. On the news, Mindspring fell $5.50, or 17.0%, to $27.375/share. Earthlink fell $1.125, or 2.6%, to $42.375/share.

Discussion: Mindspring is a leading Internet service provider that offers local Internet service in 890 locations throughout the country. The company's online subscribers can browse the World Wide Web, send electronic mail, and access 20,000 newsgroups. It delivers outstanding service and support to its customers.

Earthlink is one of the world's leading Internet service providers. The company provides online access to 1.3 million individuals and customers through its Earthlink Sprint Internet access service. It has 2,300 points of presence. The combined company will have strong marketing channels, award-winning customer service, and acquisition expertise. In addition, the company will have three million members compared to AOL's 18 million. However, it should surpass all other national ISP's by establishing itself as an obvious alternative to AOL.