Internet access provider EarthLink, which has roughly 3.5 million customers, said the acquisition will give it an additional 762,000 subscribers. The deal also helps EarthLink expand its reach into rural areas and smaller cities, which have been OneMain's focus.
Also today, EarthLink said its board of directors approved the buyback of up to 5 million shares of EarthLink common stock.
EarthLink said it expects to end the year with nearly 5 million members and annual revenues around $1.3 billion.
Under terms of the agreement, EarthLink said it will purchase Reston, Va.-based OneMain for cash and stock worth approximately $308 million, or roughly $12.27 per share for each of OneMain's 25.1 million outstanding shares. The purchase price consists of about $150 million in cash and 8.8 million EarthLink shares. Based on EarthLink's closing price yesterday of $17.94, the 8.8 million shares are worth around $158 million.
EarthLink has been busy working to narrow the gap between it and its largest competitor, Net giant America Online, which has more than 22 million subscribers.
The Atlanta-based company, which completed its $4 billion merger with MindSpring in early February, recently reported that customers left the service at rates of about 5.5 percent in January and 4.3 percent in April. It said most customers left for high-speed, or "broadband," Net access via digital subscriber line (DSL) and cable modem access.
The company has vowed to aggressively promote its own broadband service and hopes to expand its broadband audience from 45,000 to 150,000 by the end of the year.
The transaction is expected to close in the fourth quarter of this year, the companies said.