Internet service provider EarthLink (NASDAQ:ELNK) announced Friday its plan to buy ITC Deltacom for $516 million in an effort to expand product offerings and widen its customer base.
Under the terms of the agreement, EarthLink will acquire ITC Deltacom’s shares for $3 each and assume $325 million of its debt.
The deal will allow EarthLink to combine its existing ISP and IP-focused businesses with Deltacom’s integrated communications business, which it said will create a leading IP infrastructure and solutions company.
Deltacom, with its 16,400 miles of fiber optics, currently serves more than 32,000 small and mid-size businesses, multi-location enterprises, government agencies and wholesale customers.
“Together, the companies will offer customers a comprehensive suite of Internet, telecommunications and managed services supported by an exceptional team of people focused on best-in-class customer care,” the companies said in a statement.
EarthLink CEO Rolla P. Huff said the move is essential to meet the “rapidly” growing demand for high-quality IP infrastructure and managed services.
“This acquisition will position the company to provide leading edge IP solutions, while allowing us to continue to generate significant cash and retain the financial flexibility and capacity to invest in additional strategic opportunities,” Huff said.
EarthLink’s workforce will grow from 575 to just under 2,000 people with the addition of Deltacom.
The deal, subject to regulatory approvals, is expected to close in the fiscal 2010 fourth-quarter or early next year.
Also Friday, EarthLink upped its full-year guidance, now expecting net income of $97 million from its earlier prediction of $94 million.