EarthLink Buys OneMain.com

EarthLink will purchase OneMain.com and its 762,000 subscribers through a cash and stock transaction valued at near $308 million.

by Patricia Fusco
of internetnews.com
[June 8, 2000]

EarthLink, Inc. (ELNK) shored up its rank as the nation’s second largest fee-based Internet service provider Thursday when it acquired OneMain.com (ONEM) and its 762,000 subscribers.

When it adds those subscribers, EarthLink will have more than 4.2 subscribers nationwide.

EarthLink will purchase OneMain.com through a cash and stock transaction valued at approximately $308 million, or approximately $12.27 per share for each of OneMain.com's 25.1 million common shares outstanding.

The purchase price consists of approximately $150 million in cash and approximately 8.8 million shares of EarthLink common stock valued at $158 million at Wednesday’s closing price.

Rural power
The transaction expands EarthLink's national market coverage from major population centers into rural communities and smaller cities where OneMain.com has focused its operational efforts.

Garry Betty, EarthLink chief executive officer, said it saw an opportunity to leverage wider market appeal and drive growth from rural and secondary markets in the U.S.

"Consistent with EarthLink's mission to become one of the world's leading ISPs, the acquisition of OneMain.com strategically positions EarthLink to capture market share in one of the fastest-growing segments in the ISP marketplace, rural America and smaller cities," Betty said.

Steve Smith, OneMain chairman and chief executive officer, said its key business areas complements EarthLink's strategic initiatives in its narrowband, broadband, Web hosting, and e-commerce and advertising business segments.

"With EarthLink's substantial resources and national presence, we believe today's announcement brings together two like-minded organizations focused on delivering high levels of customer service and will enhance the online experience of OneMain.com subscribers," Smith said.

In addition to EarthLink’s purchase of OneMain’s near 730,000 dial-up subscriber base, the national ISP will pick-up 27,000 Web hosting customers, and 5,000 broadband customers.

Closes in the fourth quarter of this year
The transaction is expected to close in the fourth quarter of 2000. With this transaction, EarthLink expects to end the year with approximately 5 million members and annualized revenues of approximately $1.3 billion.

EarthLink also announced Thursday that its board of directors authorized a plan to repurchase up to five million shares of EarthLink common stock through open market purchases.

In summary
EarthLink purchased MindSpring Enterprises, Inc. in September 1999. The deal merged MindSpring’s 1,297,000 subscribers with EarthLink’s to achieve a total of more than 3 million customers.

OneMain acquired its subscriber base through a series of purchasing small regional ISPs across the U.S. Known as an ISP roll-up firm, OneMain stopped its buying spree last fall and transitioned its ISP collective into a formidable business focused on delivering local content to underserved markets.

America Online, Inc. (AOL) remains the nation’s largest Internet service with more than 22 million members. But EarthLink is committed to rivaling the behemoth in the fee-based ISP market segment, even though it has would have to acquire 18 million additional customers to catch up to America Online.

—End