Verizon to buy Frontier in $20 billion deal to boost fiber network

8:38 am Thursday, September 05th, 2024

(Reuters) -Verizon said on Thursday it would buy Frontier Communications in an all-cash deal worth $20 billion, as the U.S. wireless carrier looks to expand its fiber network.

Verizon has offered $38.50 per share, a premium of 37.3% to Frontier’s closing price on Sept. 3, a day before reports of a potential acquisition emerged. As of June 30, Frontier had a total debt of $11.25 billion.

Frontier shares, which had surged nearly 38% in the previous session, fell below Verizon’s offer price in premarket trading to $35.14, while Verizon climbed about 1%.

The acquisition, which is expected to close in about 18 months, will help Verizon better compete against AT&T and others by enabling it to deliver premium broadband services.

Frontier has 2.2 million fiber subscribers in 25 states, which will combine with Verizon’s roughly 7.4 million FiOS connections in nine states and Washington, D.C.

Verizon had in 2016 sold its TV and internet business in California, Texas, and Florida to Frontier in a $10.54 billion deal. This included a portion of its FiOS fiber networks and customers.

Verizon’s fiber network is now largely in the North East and mid-Atlantic regions, while Frontier’s coverage spans multiple states in the Mid West, Texas, California and others.

“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.,” Verizon CEO Hans Vestberg said.

The deal is expected to generate at least $500 million in annual run-rate cost savings by the third year and will add to Verizon’s revenue and adjusted profit.

If the deal is terminated under certain conditions, Verizon will pay Frontier a fee of $590 million.

Verizon also kept its annual forecasts for profit and wireless service revenue unchanged. It had in July missed market estimates for revenue and posted a big drop in prepaid wireless subscriber numbers due to the end of a federal internet subsidy.

Centerview Partners and Morgan Stanley were the financial advisors to Verizon, while Barclays advised Frontier.

(Reporting by Deborah Sophia in Bengaluru; Additional reporting by Harshita Mary Varghese; Editing by Sriraj Kalluvila and Arun Koyyur)