EarthLink Inc. (Nasdaq: ELNK) rose 13 percent Tuesday after long-distance telephone company Sprint Corp. (NYSE: FON) said it will buy 26 million shares in the company.
Shares in EarthLink, an Internet service provider, were up 2 15/16 to 19 15/64 following the news. Shares have fallen a long way from their 52-week high of 71 1/4. The company reported a hefty first quarter loss, but topped estimates.
Sprint, which is being acquired by MCI WorldCom (Nasdaq: WCOM), said it would buy the 26 million shares for $431 million, raising its stake in EarthLink to 26.7 percent.
The completion of the $4 billion EarthLink-MindSpring merger on Feb. 4 had reduced Sprint's stake in EarthLink to 14.6 percent.
Under the terms of the original EarthLink-Sprint alliance agreement, Sprint has the right to retain its original stake of 28.7 percent in EarthLink and may increase its ownership to this level through additional purchases, the companies said.
Sprint had six months from the time the merger closed to maintain its proportional interest.
"Sprint's most recent investment of $77 million in EarthLink following our deal with Apple (Nasdaq: APPL), coupled with its current investment of roughly $431 million, reaffirms Sprint's commitment to our strategic alliance," said Garry Betty, CEO of EarthLink in a company release.
Earthlink is the second biggest Internet service provider in the US, behind industry giant America Online (NYSE: AOL).