NEW YORK: Internet service providersEarthLink Network Inc. and MindSpring Enterprises Inc. on Thursday agreed to merge in a stock swap, forming acompany with an expected market capitalization of $3 billion.The combined company would form the second largest Internetservice provider in the U.S. with more than three millionmembers once the deal is final, the companies said.The new company would have annual revenues of nearly $650million, based on results for the quarter ending June 30, and acombined cash balance of more than $500 million, reports Reuters. Under terms of the agreement, MindSpring and EarthLink willmerge into a third, newly-created company. MindSpring holderswill receive one share in the new company for each MindSpringshare, and EarthLink holders will receive 1.615 shares in thenew company for each share of EarthLink.
In early market reaction to the deal, EarthLink shares rosein pre-opening trade to $46 from a close of $43.50 onWednesday, while MindSpring shares slipped to $29 from$32.875.
Both companies have also granted each other the option tobuy up to 19.9 percent of the other's common stock undercertain conditions.
A spokeswoman did not immediately know how much of theequity in the new company will be owned by each group ofshareholders.
EarthLink has scheduled a press conference in New York at10:00 a.m. EDT (1400 GMT)to discuss the deal.
The new company will maintain the EarthLink name and willtrade under the existing stock symbol "ELNK" on the Nasdaqmarket.
The deal is expected to close in the first quarter of 2000,and is subject regulatory approval, certain third partyconsents and approval from both companies' shareholders. Itwill be accounted for as a pooling of interests.
Charles Brewer, founder, chairman and chief executive ofMindSpring, will serve as the new company chairman. EarthLinkPresident and CEO Charles "Garry" Betty will be CEO of the newcompany, while Mike McQuary, MindSpring's president and chiefoperating officer, will serve as president.
Betty and McQuary will also serve on the board ofdirectors, as will Sky Dayton, EarthLink's founder andchairman.
The spokeswoman did not immediately know what the totalsize of the board will be, nor its composition