Robbins Arroyo LLP: Acquisition of EarthLink Holdings Corp. (ELNK) by Windstream Holdings, Inc. (WIN) May Not Be in Shareholders’ Best Interests
Robbins Arroyo LLP is investigating the proposed acquisition of EarthLink Holdings Corp. (NASDAQGS: ELNK) by Windstream Holdings, Inc. (NASDAQGS: WIN). On November 7, 2016, the two companies announced the signing of a definitive merger agreement pursuant to which Windstream and EarthLink will combine in an all-stock merger of equals, with Windstream shareholders owning approximately 51% of the combined company and EarthLink shareholders owning approximately 49% of the combined company. Under the terms of the agreement, EarthLink shareholders will receive 0.818 shares of Windstream common stock for each share of EarthLink common stock with a value of $5.92 based on Windstream’s closing price on November 4, 2016.
Is the Proposed Acquisition Best for EarthLink and Its Shareholders?
Robbins Arroyo LLP’s investigation focuses on whether the board of directors at EarthLink is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $5.92 merger consideration represents a premium of only 9.20% based on EarthLink’s last unaffected closing price on November 3, 2016. This premium is significantly below the average one day premium of nearly 30.75% for comparable transactions within the past year. Further, the $5.92 merger consideration is significantly below the target price of $10.00 set by an analyst at B. Riley & Co. on November 3, 2015, the target price of $10.00 set by an analyst at Drexel Hamilton on August 4, 2015, and the target price of $8.00 set by an analyst at Cowen on October 17, 2016. In the last three years, EarthLink traded as high as $9.86 on November 9, 2015, and most recently traded above the merger consideration – at $5.93 – on October 31, 2016.
On November 7, 2016, EarthLink reported strong earnings results for its third quarter 2016. EarthLink reported net income of $0.2 million for the three months ended September 30, 2016, compared to a net loss of $10.5 million for the same period of the prior year. Additionally, EarthLink has beaten analyst estimates for revenue and adjusted earnings per share in three of the past four quarters, and has beaten analyst estimates for adjusted net income for the past four consecutive quarters. In commenting on these results, EarthLink Chief Executive Officer Joe Eazor remarked, “EarthLink delivered another quarter of solid operational and financial results in the third quarter. We launched our SD-WAN product and have signed new deals with customers who are excited about EarthLink’s Concierge Service supporting this important new technology.”
In light of these facts, Robbins Arroyo LLP is examining EarthLink’s board of directors’ decision to sell the company now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.
EarthLink shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
EarthLink shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.
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