Internet service providers Earthlink (ELNK) and MindSpring (MSPG) Thursday agreed to merge in a stock swap worth around $1.7 billion, forming an ISP aimed at rivaling online powerhouse America Online (AOL) .
EarthLink shares rose sharply on the news, adding 4, or 9%, to 47 1/2 in early New York trading, while shares of MindSpring retreated 2 1/4, or 7%, to 30 5/8. The combined company, to be called EarthLink and headquartered in MindSpring's hometown of Atlanta, will boast more than 3 million members, the companies said. By comparison, AOL has an estimated membership base of more than 18 million subscribers.
Under the deal, EarthLink shareholders will get 1.615 shares of the new company, while MindSpring holders will get a share of the new EarthLink for each Mindspring share they hold.
In a news release trumpeting the merger, executives spoke of their similar business outlooks as if there had been only one company all along. "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 Sky Dayton, EarthLink's founder, referring to Charles Brewer, founder of MindSpring. "In many ways, MindSpring and EarthLink's vision, philosophy and growth have been a mirror image of each other."
The companies expect to complete the merger in a year and to continue EarthLink's contractual partnership with