Private equity, Mergers and Acquisitions, Midmarket, Mergers and Acquisitions, Content

Windstream Sells Consumer EarthLink Business to Private Equity

Windstream has sold its EarthLink consumer Internet business to Trive Capital, a private equity firm, for $330 million. This is Windstream's second asset sale in recent weeks, a clear sign that the midmarket MSP wants to strengthen its balance sheet while doubling down on SD-WAN, unified communications, and other managed services.

The EarthLink consumer business offers Internet access, online backup, managed web design, web hosting and email services to over 600,000 customers throughout the United States, the companies said.

Windstream has owned that consumer Internet business since acquiring the overall EarthLink company in early 2017. Shortly thereafter, Windstream also acquired Broadview Networks for $227.5 million in cash. At the time, the rapid-fire acquisitions stretched Windsteam's management team thin, and the company began to struggle financially. The firm shocked Wall Street with a dividend cut and layoffs by mid-2017.

Windstream: Selling Off Assets, Focusing on Midmarket Managed Services

Fast forward to present day, and Windstream seems to be in hyper-focus mode. The consumer EarthLink asset sale comes only a few weeks after Windstream announced deals to sell certain fiber assets in Minnesota and Nebraska to Arvig Enterprises Inc. for $60.5 million.

Tony Thomas
Tony Thomas

In a prepared statement about the EarthLink deal, Windstream CEO and President Tony Thomas said:

“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.

Added Trive Managing Partner Conner Searcy:

“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. We intend to provide additional resources and access to deep industry relationships to help grow the brand in the coming years.”

Windstream's Financial Metrics

No doubt, Windstream  is a company in transition. The firm now provides data networking, core transport, security, unified communications and managed services to mid-market, enterprise and wholesale customers across the U.S.

There are signs that the business is stabilizing, though concerns about a potential Windstream bankruptcy remain credible.

Windstream's total revenues were $1.42 billion in Q3 2018, down 5 percent from the corresponding quarter the previous year, the company announced in November 2018. On a stronger note, the company's net income was $41 million in Q3 2018, compared to a net loss of $102 million in Q3 2017.

Still, the company has heavy debt, and some investors are worried about potential bond defaults, Bloomberg asserts. The company’s long-term borrowings stood at $5.72 billion at the end of the third quarter, the Bloomberg report states.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.