Windstream sells off Earthlink consumer arm for $330 million

Windstream Holdings Inc. closed out a challenging year on Monday with the all-cash sale of its Earthlink branded internet service for $330 million, the Little Rock telecom announced Monday (Dec. 31).

Windstream announced the year-ending deal just after the close of market on the last day of trading in 2018. The buyer in the all-cash deal is Trive Capital, a Dallas-based private equity firm that specializes in investing and acquiring middle-market firms and assets across multiple sectors.

Windstream originally close on its acquisitions of Earthlink Holdings Inc. in February 2017 for $1.1 billion. Earthlink’s legacy internet business, one of the first ISPs to offer high-speed internet service in the late 1990s, now offers broadband, online back-up, managed web design, web hosting and various email services to over 600,000 customers across the U.S.

“This transaction enables us to divest a non-core segment and focus exclusively on our two largest business units. In addition, it improves our credit profile and metrics in 2019 and beyond,” said Windstream President and CEO Tony Thomas.

Since its merger with Earthlink in 2017, Windstream has struggled to return to profitability as rural consumers in areas where the company operates have vaulted to competitors with faster internet speeds. The sale of Earthlink assets further allows Windstream to monetize assets and pay off debt related to several smaller acquisitions and the company’s 2015 spin-off of the former Communications Sales & Leasing (CS&L), which changed its name to Uniti Group two years ago.

On Dec. 18, Windstream completed another cash deal to sell off its dormant dark fiber assets in Minnesota and Nebraska to Arvig Enterprises Inc. for $60.5 million. Following that deal, Windstream CFO Bob Gunderman said the Little Rock-based telecom still had “significant asset value to monetize” across the company’s 150,000-mile telecom network.

Monday’s deal with Trive Capital is effectively immediately, officials said. The Dallas-based private equity group has invested in over 70 companies across a wide range of manufacturing, distribution and service sectors representing more than $6 billion in aggregate revenue, company officials said. Earlier this year, Trive acquired the assets of Fort Smith-based SSW Holding Company Inc. for an undisclosed sum. SSW makes steel and glass components for the food and cooking industry.

“We are excited to partner with and support the EarthLink management team in continuing to provide great products and services available to millions of households in the United States,” said Trive Managing Partner Conner Searcy. “We intend to provide additional resources and access to deep industry relationships to help grow the brand in the coming years.”

Windstream is also awaiting a federal court decision in New York City on a two-year old legal battle with Wall Street hedge fund Aurelius Capital Management concerning a purported notice of default following Uniti’s spin-off into a publicly-held real estate investment trust (REIT) in April 2015.

The trial before U.S. District Judge Jesse Furman for the Southern District of New York occurred July 23-25, and the court heard final arguments on July 31. Furman is also currently presiding over a highly-anticipated federal lawsuit on the Trump administration’s efforts to add a citizenship question to the 2020 census.

“The court has not issued a ruling,” Windstream spokesman David Avery said of the Aurelius lawsuit.

At the close of business Monday, Windstream’s shares closed out the year at $2.09, down 13 cents on the Nasdaq stock exchange. Over the past 52 weeks, the company’s shares have traded in the range of $1.77 as a low and $9.65 as a high.