EarthLink to Buy ITC Deltacom for $3 a share

ITC DeltaCom Inc. (ITCD.OB) shares advanced more than 100 percent on Friday after the company said it agreed to be bought by Internet service provider EarthLink Inc. (ELNK) for $3 a share in cash.

Atlanta, Georgia – based Earthlink is buying ITC DeltaCom in a deal worth $516 million, including the assumption of $325 million in debt. The company notes that it is paying about 4.7x adjusted EBITDA for the 12 months ended June 30. Earthlink, which ended Q2’10 with $740 million in cash and marketable securities, also said it now sees full year 2010 adjusted EBITDA of $207 million to $211 million, with free cash flow of $193 million to $201 million, and net income of $94 million to $97 million.

Earthlink’s purchase of the fiber optics networks company Deltacom, which has 16,400 miles of fiber optic infrastructure in the Southeast and serves more than 32,000 small and mid-size businesses, is expected to close in the fourth quarter of 2010 or the first quarter of 2011.

Shares of ITCD, which trade over the counter, gained $1.47, or 101.38 percent, to $2.92 at 12:35 p.m. ET. ELNK fell 22 cents, or 2.42 percent, to $8.87.

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