In Short:
Verizon plans to acquire Frontier Communications for $20 billion in cash, offering $38.50 per share, a 37.3% premium. This deal aims to expand Verizon’s fiber network and enhance competition with AT&T. The acquisition will combine Verizon’s 7.4 million and Frontier’s 2.2 million fiber subscribers, benefiting both companies financially. The deal is expected to close in about 18 months.
Verizon has announced its intention to acquire Frontier Communications in an all-cash transaction valued at $20 billion. This move is part of the U.S. wireless carrier’s strategy to enhance its fiber network.
Acquisition Details
Verizon has proposed an offer of $38.50 per share, which represents a premium of 37.3% over Frontier’s closing price on September 3, just prior to the acquisition discussions becoming public. As of June 30, 2023, Frontier reported total debt of $11.25 billion.
Market Reaction
Following the announcement, Frontier’s shares, which had previously risen by nearly 38%, experienced a decline, trading below Verizon’s offer price at $35.14 during premarket trading. In contrast, Verizon‘s shares increased by approximately 1%.
Strategic Implications
The acquisition is projected to conclude in approximately 18 months, enabling Verizon to enhance its competitive positioning against AT&T and other rivals by facilitating the provision of premium broadband services. Frontier boasts 2.2 million fiber subscribers across 25 states, which will complement Verizon’s existing 7.4 million FiOS connections in nine states, including Washington, D.C.
In 2016, Verizon divested its TV and internet operations in California, Texas, and Florida to Frontier for $10.54 billion, which included parts of its FiOS fiber infrastructure and customer base.
Regional Networks
Currently, Verizon’s fiber network is predominantly located in the Northeast and mid-Atlantic regions, while Frontier‘s services extend across various states in the Midwest, Texas, California, and beyond.
CEO Statements
Verizon’s CEO, Hans Vestberg, stated, “The acquisition of Frontier is a strategic fit. It will build on Verizon’s two decades of leadership…and is an opportunity to become more competitive in more markets throughout the U.S.”
Financial Forecasts
The deal is anticipated to yield at least $500 million in annual run-rate cost savings by the third year, further contributing to Verizon’s revenue and adjusted profit margins. Should the acquisition be terminated under specific circumstances, Verizon has agreed to pay Frontier a termination fee of $590 million.
Advisors Involved
Centerview Partners and Morgan Stanley served as financial advisors for Verizon, while Barclays acted as the financial advisor for Frontier.
