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EarthLink and MindSpring Announce Strategic Merger; EarthLink
ELNK.O>
EarthLink and MindSpring
Announce Strategic Merger; EarthLink and MindSpring Combine to Create
the Nation's Second Largest Internet Access Provider
NEW YORK--(BUSINESS WIRE)--Sept. 23, 1999--EarthLink
(NASDAQ:ELNK) and MindSpring (NASDAQ:MSPG) jointly announced today
that they have signed a definitive merger agreement that will create
the nation's second largest provider of Internet access, with an
estimated combined base of over three million members upon completion
of the deal.
In the merger, MindSpring and EarthLink will both merge into a
newly formed public company, with MindSpring stockholders receiving
one share of the new company stock for each share of MindSpring stock
and EarthLink stockholders receiving 1.615 shares of the new company
stock in exchange for each share of EarthLink stock. The combined
company will be known as EarthLink and will trade under the Nasdaq
symbol "ELNK." Subject to several conditions, including regulatory
approvals, approval by both companies' shareholders, and certain
third-party consents, the transaction is expected to close in the
first quarter 2000.
Based on the closing price of both companies' stock on Wednesday,
September 22, the combined market capitalization of the new company
would be over $3 billion. Based on results for the quarter ending June
30, 1999, the merged company would have annualized revenues of nearly
$650 million. Also as of June 30, 1999, the new company would have a
combined cash balance of more than $500 million, which is adjusted for
the anticipated redemption of all of MindSpring's currently
outstanding five per cent convertible subordinated debt.
The merger marks a culmination of aggressive growth strategies
pursued independently by both EarthLink and MindSpring over the past
five years. By combining their businesses, strong marketing channels,
award-winning customer service and acquisition expertise, the merged
company should surpass all other national ISPs by establishing itself
as the clear alternative to America Online. In addition, a recent JD
Power and Associates study ranked MindSpring and EarthLink numbers one
and two, respectively, in overall customer satisfaction among the
largest National Internet Service Providers.
The new company will be led by executives from both EarthLink and
MindSpring. In the new company, Charles Brewer, MindSpring's founder,
chairman and CEO will be chairman; Charles "Garry" Betty, EarthLink's
president and CEO, will be CEO; Mike McQuary, MindSpring's president
and chief operating officer, will be president; and Sky Dayton,
EarthLink's founder and chairman, will be a director. Betty and
McQuary will also serve on the Board of Directors.
"I believe this marriage of equals will position the new company
as the clear leader in the Internet access arena," said Betty. "By
leveraging the synergies between our operations, marketing channels
and member service philosophies, we will have built a solid platform
to service our current members and, at the same time, accelerate our
aggressive growth strategy."
"Sky and I both founded our companies after our first frustrating
attempts to get on the Internet," said Brewer. "We created our
companies with a deliberate focus on providing our members with
superior service. So it's no accident that both EarthLink and
MindSpring have consistently been recognized as the two leading ISPs
in customer service and satisfaction. Together, we will continue
delivering the same award-winning service and support that our members
expect."
"Five years ago, Charles and I were among the few visionaries who
saw the potential in the Internet to redefine the way people
communicate," said Dayton. "In many ways, MindSpring and EarthLink's
vision, philosophy and growth have been a mirror image of each other
since we started. But with more than 70 percent of US households still
not connected to the Internet, we both realize we are still facing a
market in its infancy. This merger combines two companies who share a
vision, and it gives us the tools to bring great Internet service to
the masses."
"This unique partnership literally brings together some of the
best minds in the Internet industry," said McQuary. "We believe that
the exceptional pool of talent and resources from both sides will
propel the new company to new heights in the rapidly growing Internet
space."
Transaction Terms At-A-Glance
-- Headquartered at MindSpring's current headquarters in Atlanta,
the new company will carry the "EarthLink" name and will trade
under EarthLink's current Nasdaq symbol, ELNK.
-- The new company will adopt MindSpring's Core Values and Beliefs
as the company's guiding principles.
-- This will be a stock-for-stock merger of equals. MindSpring and
EarthLink will both merge into a new company. MindSpring
shareholders will receive one share of stock in the new Company
in exchange for each MindSpring share, and EarthLink shareholders
will receive 1.615 shares of stock in the new company in exchange
for each EarthLink share.
-- The merger is expected to be completed during the first quarter
2000.
-- The merger is structured to be accounted for as a
pooling-of-interests.
-- EarthLink's broad business alliance and contractual arrangements
with Sprint will all remain intact.
-- EarthLink and MindSpring have each granted the other an option to
purchase shares equal to up to 19.9 percent of the other's common
stock under certain circumstances.
-- Certain significant and principal stockholders of the companies
have agreed to vote in favor of the merger.
Key Company Highlights Upon Close of Transaction
-- An estimated combined member base of approximately 3 million
subscribers
-- Initial projected marketing expenditure of $80MM per quarter
-- 90,000 member Web hosting accounts and a full range of related
products and services
-- Nearly 4,000 employees in Atlanta; Dallas; Phoenix; Harrisburg,
PA; Pasadena, Sacramento and San Jose, CA; and Seattle, WA
-- A strong history of award-winning service and customer
support. A 1999 JD Power and Associates study ranked MindSpring
and EarthLink numbers one and two, respectively, in overall
customer satisfaction among the largest National Internet Service
Providers.
About MindSpring
MindSpring is a leading national Internet service provider
focused on delivering outstanding service and support to its
customers. MindSpring's dial-up subscribers can browse the World Wide
Web, send electronic mail, participate in informative on-line chats
and access over 20,000 newsgroups. MindSpring offers local Internet
service in more than 890 locations throughout the United States. The
MindSpring Biz division is a leading provider of Web hosting services
and domain registrations, and offers other value-added services such
as Web page design.
About EarthLink
EarthLink is one of the world's leading Internet service
providers. Through its unified EarthLink Sprint Internet access
service, the company makes the Internet relevant and productive to
more than 1.3 million individuals and businesses every day.
Headquartered in Pasadena, EarthLink provides a full range of
innovative access and hosting solutions to thousands of communities
internationally from more than 2,300 points of presence. EarthLink and
Sprint Corporation (NYSE:FON) have formed a broad business
relationship to create an Internet service with the potential to reach
millions of new customers. Sprint is a global communications company
and one of the world's largest carriers of Internet traffic.
Information about EarthLink and EarthLink Sprint services is available
by calling (800) 395-8425 and through EarthLink's Web site at
www.earthlink.net.
Certain of the statements contained in this release are
forward-looking statements (rather than historical facts) that are
subject to risks and uncertainties that could cause actual results to
differ materially from those described. With respect to such
forward-looking statements, the companies seek the protections
afforded by the Private Securities Litigation Reform Act of 1995.
These risks include, without limitation, (1) that the companies will
not retain or grow their member bases, (2) that the companies will
fail to be competitive with existing and new competitors, (3) that the
companies will not be able to sustain current growth, (4) that the
companies will not adequately respond to technological developments
impacting the Internet, (5) that needed financing will not be
available to the companies if and as needed, and (6) that the Year
2000 problem will adversely affect the companies' operations. This
list is intended to identify certain of the principal factors that
could cause actual results to differ materially from those described
in the forward-looking statements included elsewhere herein. These
factors are not intended to represent a complete list of all risks and
© 1999 Reality Online Inc., A REUTERS Company 1000 Madison Avenue, Norristown, PA 19403, USA.
All rights reserved.
(Voluntary Disclosure: Position- Long; ST Rating- Strong Buy; LT Rating- Strong Buy)
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