Verizon Communications’ planned $9.6 billion acquisition of Frontier Communications is facing significant skepticism from major investors, with concerns centering around the offer price. According to sources familiar with the situation, Glendon Capital Management, Frontier’s second-largest shareholder, plans to vote against the deal, arguing that Verizon’s offer of $38.50 per share is too low. When including the debt acquired in the transaction, the total deal value rises to approximately $20 billion.
This opposition is critical as a majority of outstanding shares must approve the transaction for it to move forward in a shareholder vote scheduled for November 13. Cerberus Capital Management, which holds a 7.3% stake in Frontier, has also privately conveyed that it believes the proposed price significantly undervalues the company. However, the firm has not publicly stated how it will vote.
Smaller investors are echoing these concerns, with reports indicating they plan to reject the deal as well. Australian investor Cooper Investors PTY Limited, which owns 800,000 shares of Frontier, has formally notified the company’s board that it will oppose the acquisition, citing that the offer does not adequately reflect Frontier’s value or the potential synergies from the merger. Co-portfolio managers Geoffrey Di Felice and Marcus Guzzardi stated in a letter to the board that Frontier’s standalone value could be as much as 62% above the current offer.
Despite this backlash, Verizon described the acquisition as a “strategic fit” that would enhance its competitiveness in key markets, particularly against rivals AT&T and T-Mobile. Verizon CEO Hans Vestberg stated that the acquisition would close the gap in Verizon’s market positioning.
When the deal was announced last month, it was positioned as a 44% premium over Frontier’s 90-day volume-weighted average share price. However, Frontier’s stock closed at $35.71 on Tuesday, falling $2.79 below Verizon’s offered price, indicating market doubt about the deal’s viability.
Research analysts have echoed investor concerns, suggesting that the offer is undervalued and recommending that shareholders wait for a potentially better deal. Jonathan Chaplin of New Street Research asserted that Verizon should consider paying at least $67 per share to ensure value creation for its shareholders.
Frontier’s largest investor, Ares Management, which holds a 15.6% stake, has yet to publicly comment on its stance regarding the offer or how it plans to vote in the upcoming shareholder meeting.
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