Internet service provider EarthLink (Nasdaq: ELNK) has agreed to acquire through a tender offer PeoplePC (Nasdaq: PEOP), a provider of Internet access based in San Francisco.

Under the terms of the tender offer and merger agreement, Atlanta-based EarthLink will offer cash for an aggregate purchase price of approximately $10 million. Pre-closing adjustments to the purchase price could raise the total to as much as $14.3 million.

Stocks for the two publicly-traded companies were down as of midday. ELNK was trading around $6.35, down from high of $6.60 for the day. Still, that price is not far from the 52-week low of $6.23 and well off the high of $18.92. PEOP was trading at 7 cents, down from its daily high of 10 cents. The 52-week low is 6 cents and the high is 64 cents.

In connection with the acquisition, EarthLink will also assume approximately $35 million in deferred service liabilities to PeoplePC subscribers who purchased prepaid Internet access services along with a personal computer as part of a bundled package. Founded in 1999, PeoplePC claimed it had created a cost-efficient ISP technology platform and a unique customizable service for corporations, associations and other private label distribution opportunities. Clients include Ford, Delta, Vivendi, Universal, AAA and VFW.

“As part of our growth strategy, EarthLink is committed to providing a full range of Internet services to meet the access needs of different customer segments,” Garry Betty, EarthLink chief executive officer, said in a statement. “PeoplePC’s product capabilities complement our existing offerings and bring to EarthLink a technical and service platform that provides a compelling service to the value segment of the ISP market.”

This transaction is expected to close during the third quarter. The acquisition will bring to EarthLink approximately 60,000 paying monthly subscribers plus approximately 500,000 prepaid, bundled subscribers. EarthLink says does not expect the acquisition to impact materially its projections for revenues or earnings before interest, taxes, depreciation and amortization for 2002.