Austar has announced it intends to pay AUS$0.20 for each ordinary Eisa share, putting the value of Eisa in shares at around AUS$24.4 million (US$14.64 million).

However, Eisa shares have since slumped by more than 14 percent in afternoon trading following the announcement, down AUS$0.035 or 14.29 percent to AUS$0.21.

Eisa shares earlier hit a low of AUS$0.20 after coming out of a trading halt following the announcement.

The board of Eisa has recommended shareholders accept the bid, in the absence of a higher offer, and the company's directors intend to accept the offer for their own shares.

Under the agreement, Eisa has also granted Austar the option to acquire Eisa businesses based in Darwin, Cairns and Canberra.

Eisa managing director Damien Brady said the company's customers would benefit from the offer by the pay television provider. "We have a solid and valuable ISP business which will fit nicely with Austar," he said.

Austar chief executive John Porter said the acquisition of Eisa would complement the pay television provider's regional agenda.

"A substantial proportion of Austar's subscriber base is in regional Australia where Austar is already progressively marketing its dial-up service, austarnet, and the chello broadband service," he said.

"In addition, Risa has 48 points of presence (POPs) in place, 27 of which are located in regional markets. This infrastructure will assist Australia in establishing its Internet services. Acquiring an existing network will be a great boost to our rollout plans," said Porter.

Austar will also provide a AUS$7.5 million (US$4.5 million) short-term loan facility to Eisa to fund its working capital requirements. "The loan is intended to ensure that Eisa customers continue to receive all of their services during the takeover period," Porter said. "Austar has always prided itself on the quality of service its offers its customer, and we know that this is also a priority for Eisa."

At the same time, Austar may increase the value of its offer if Eisa recovers any of the AUS$20 million (US$12 million) deposit forfeited to ISP UUNet when the recent OzEmail acquisition process was terminated.

The offer may be increased by an amount that represents the tax-affected net amount recovered from UUNET on a per share basis, Austar said. "This will enable Eisa shareholders who accept Austar's offer to benefit from the potential price increase," Austar said in a statement.

Earlier this month (see story), UUNet informed Eisa that it was terminating its sale of business agreement, citing a lack on Eisa's part to have necessary financial commitments in place.

Following the failed OzEmail acquisition, acting chairman Evan Rees indicated Eisa may have already chosen to follow the current path in his address to the Annual General Meeting.

"We now believe the future of Eisa lies with the Company merging with another. As the multi-media market continues to rationalize, only the largest companies will be able to attract the content and e-commerce needed to satisfy customers," Rees said earlier this month. "In Eisa's case, we are now talking to interested parties and expect to make an announcement on Eisa's future soon."