Verizon announced on Thursday that it will acquire Frontier Communications in an all-cash deal valued at $20 billion. The move aims to bolster Verizon’s fiber network and competitiveness in the U.S. broadband market. Verizon has offered $38.50 per share, a 37.3% premium over Frontier’s closing price on September 3, just before acquisition rumors surfaced. As of June 30, Frontier carried $11.25 billion in total debt. While Frontier shares initially soared nearly 38%, they dipped to $35.14 in premarket trading following the announcement. Verizon saw a 1% uptick.
The acquisition, set to close in about 18 months, is expected to enhance Verizon’s ability to deliver premium broadband services, positioning it more favorably against rivals like AT&T. Frontier’s 2.2 million fiber subscribers across 25 states will complement Verizon’s existing 7.4 million FiOS connections, primarily situated in the Northeast and mid-Atlantic regions.
This transaction marks a reversal from 2016 when Verizon sold its TV and internet operations in California, Texas, and Florida to Frontier for $10.54 billion. Verizon CEO Hans Vestberg described the acquisition as a “strategic fit,” that would amplify Verizon’s market presence and competitiveness across the U.S.
The deal is anticipated to generate at least $500 million in annual cost savings by the third year and will contribute to Verizon’s revenue and adjusted profit. Should the deal fall through under specific conditions, Verizon will owe Frontier a $590 million termination fee.
Despite this significant acquisition, Verizon maintained its annual profit and wireless service revenue forecasts unchanged. This comes after it missed revenue expectations and reported a decline in prepaid wireless subscribers in July, attributed to the cessation of a federal internet subsidy.
Centerview Partners and Morgan Stanley advised Verizon, while Barclays served as Frontier’s financial advisor.
Original Story https://www.cnbc.com/2024/09/05/verizon-vz-to-acquire-frontier-communications.html
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