Windstream Holdings, Inc. and EarthLink Holdings Corp. agreed to a $673 million all-stock merger, combining the network service providers as they look to trim costs amid declining revenue.

Under the terms of the deal, Earthlink shareholders will receive 0.818 shares of Windstream for each EarthLink share owned. According to Friday's closing prices, that values EarthLink stock at $5.92 a share. That level is a 9% premium to Earthlink's closing price of $5.42 on Nov. 3, the day before talks of a merger were reported, but below Friday's closing level of $6.22.

Windstream?which provides cloud computing, broadboad and voice services?said it expects to issue roughly 93 million shares to complete the deal. EarthLink also provides cloud networking as well as other network services. The companies said the deal is valued at about $1.1 billion including debt.

Upon closing of the transaction, expected in the first half of 2017, Windstream shareholders will own 51% of the combined company and EarthLink shareholders will own 49%.

The companies believe the increased scale of a combined company?which will keep the Windstream name?will give it the leverage to compete while cutting more than $125 million in annual operating and capital expenses through synergies.

Windstream also reported results for the September quarter on Monday. Total revenue and sales fell 10% to $1.34 billion, as it posted a bigger net loss of $66.2 million, or 72 cents a share, compared with $7.2 million, or 8 cents a share, a year ago.

EarthLink also reported results for the latest period, saying sales slipped 13% to $270.9 million. The company swung to a loss of $10.5 million compared with a profit of $230,000 in the year-ago period.

Shares of both EarthLink and Windstream were inactive in premarket trading.

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

November 07, 2016 08:45 ET (13:45 GMT)

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