Kelley Drye Represents One Communications in Merger with Earthlink

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EarthLink, Inc.(NASDAQ: ELNK) is acquiring One Communications Corp. for $370 million in cash, and the payment of approximately $285 million of One Communications net debt.

The transaction purchase price represents a multiple of approximately 3.7x adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for the 12 months ended September 30, 2010, including $20 million in expected cost synergies and excluding one-time transaction costs.

The agreement provides for EarthLink’s acquisition of One Communications by means of a merger of a newly formed indirect subsidiary with and into One Communications, with One Communications surviving as an indirect wholly owned subsidiary of EarthLink.

EarthLink plans to integrate One Communications into its newly established EarthLink Business division.  After the closing of this transaction, EarthLink Business will operate a nationwide IP (Internet protocol) network with underlying fiber assets in 30 of the top 50 metropolitan statistical areas in the country.  The combined fiber network will span approximately 28,000 route miles across 27 states, with 923 collocations, 55 IP and circuit-based switches and 68 metro fiber rings.  With the addition of One Communications, EarthLink will have nearly 3,500 employees nationwide.

The acquisition will provide EarthLink with a strong IP network footprint in the Northeast, Midwest, and Mid Atlantic regions; geographical expansion for managed IP services product strategy supported by One Communications’ employee base; and a solid foundation for potential future acquisitions of revenue bases in the region.

EarthLink ended the third quarter of 2010 with $572 million in cash and marketable securities pro forma the recent closing of its $527 million acquisition of ITC^DeltaCom.  EarthLink’s share repurchase program has approximately $146 million available under the current authorization.  For the 12-month period ended September 30, 2010, EarthLink and Deltacom together with One Communications would have generated approximately $1.64 billion in revenue, $1.15 billion of which is from its combined business services segments.  During this period, One Communications generated $79 million in Adjusted EBITDA.  EarthLink expects to achieve annual cost synergies of approximately $20 million to be fully realized on a run rate basis by the end of the third year after closing.

The merger has been approved by the boards of directors of both companies and the stockholders of One Communications.  The transaction, subject to the satisfaction of several conditions, is expected to close in the first half of 2011.

One Communications with corporate headquarters in Burlington, Massachusetts, and operational headquarters in Rochester, New York, is one of the largest privately held, multi-regional integrated telecommunications solutions providers in the United States.  With approximately 1,500 employees, One Communications serves approximately 113,000 small and mid-sized business customers in 17 states across the Northeast, Mid-Atlantic and Upper Midwest, including the major metropolitan markets of Boston, New York, Philadelphia, Baltimore and the District of Columbia.  One Communications products include a wide range of data, voice (both traditional and VoIP) and integrated voice/data solutions that scale with bandwidths ranging from T1s to fiber-based speeds.  One Communications network consists of 629 collocations, connected by more than approximately 11,700 route miles of fiber.

EarthLink is a leading provider of IP infrastructure and services to medium-sized and large businesses, enterprise organizations and over 1.5 million consumers across the United States.  The company has been providing Internet access and communications services for decades and has earned an award-winning reputation for both outstanding customer service and product innovation.  EarthLink Business^TM provides voice, data, mobile and equipment services over a Southeast fiber network and MPLS-based (multiprotocol label switching) services nationwide.

Kelley Drye partners Merrill B. Stone and Jack J. Miles, special counsel Pamela D. Kaplan and Steven L. Humphreys and associates Andrew H. Lee and Victoria E. Anderson served as legal counsel to One Communications in this transaction.