Investors Pressure Verizon-Frontier Deal to Raise Price: Will It Go Through?

Frontier Communications Acquisition: Shareholder Standoff

As the telecommunications industry buzzes with Verizon’s $20 billion acquisition of Frontier Communications, investors are gearing up for a high-stakes showdown at an upcoming meeting. The acquisition, set against the backdrop of Canada-based BCE’s $3.6 billion bid for Ziply, has stirred a flurry of demands from Frontier shareholders for a significant price hike. Here’s a breakdown of the escalating situation:

1. Valuation Debate:
   • Frontier investors argue that the proposed valuation metrics in BCE’s Ziply acquisition indicate a much higher price tag for Frontier.
   • With a projected growth trajectory suggesting shares worth over $50, shareholders are pushing for a more lucrative deal.
2. Investor Standoff:
   • Glendon Capital Management and Cerberus Capital Management, with a combined 17% stake in Frontier, are leading the charge for an increased deal price.
   • Ares Management, the company’s largest shareholder with a 15% stake, remains undecided amidst the mounting pressure.
3. Verizon’s Stance:
   • Despite offering a 44% premium over Frontier’s trading range, Verizon stands firm on its deal price of $38.50.
   • The acquisition is pivotal to Verizon’s fiber internet expansion strategy, hinting at a steadfast commitment to seeing the deal through.
4. Shareholder Dilemma:
   • Analysts remain divided on the shareholders’ bold valuation claims, presenting investors with a stark choice between cashing in or embracing the uncertainties of a solo future.
   • Frontier’s share price hovers around $34, prompting investors to weigh their options meticulously.

In a surprising turn of events, proxy advisers ISS and Glass Lewis have advised shareholders to abstain from voting, effectively challenging the proposed deal price. The brewing tension reflects the complexity of the situation and the vested interests at play.

Frontier Communications’ tumultuous journey, from bankruptcy in 2020 to its recent relisting on the stock market, underscores the enduring resilience of the company amid financial upheavals. As telecom giants navigate an increasingly competitive landscape, characterized by fiber network investments and strategic acquisitions, Frontier confronts a pivotal crossroad in its trajectory.

Amidst this whirlwind of negotiations and conflicting interests, the telecommunications industry stands witness to a high-stakes game of brinkmanship. Only time will reveal the outcome of this gripping standoff, poised to reshape the industry landscape.

Additional insights provided by industry experts James Fontanella-Khan and Eric Platt illuminate the intricate dynamics at play in this unfolding saga.