Verizon Communications is facing resistance from some of Frontier Communications’ largest shareholders over its proposed $9.6 billion acquisition.
Glendon Capital Management, the second-largest shareholder with nearly 10 percent stake in Frontier, has expressed dissatisfaction with Verizon’s $38.50 per share offer, deeming it too low, Reuters news report said. With the inclusion of debt, the deal would be valued at $20 billion.
On September 5, Verizon announced the deal to buy Frontier, a leading fiber internet provider in the U.S. with 2.2 million fiber subscribers across 25 states. Verizon has 7.4 million Fios connections in 9 states and Washington, D.C.
Cooper Investors, an Australia-based global investment manager and significant stockholder of Frontier Communications Parent, has expressed its opposition to the acquisition of Frontier by Verizon Communications for $38.50 per share.
Glendon Capital plans to vote against the acquisition when it is presented to shareholders on November 13, a crucial vote that requires a majority of outstanding shares for approval.
Another key player, Cerberus Capital Management, which holds 7.3 percent of Frontier, also privately believes Verizon’s offer undervalues the company, though it has not disclosed how it will vote.
Ares Management, Frontier’s biggest investor with a 15.6 percent stake, declined to comment on its views about the price or how it may cast its vote next month.
The opposition from Frontier’s major investors reflects broader concerns, echoed by analysts, that Verizon’s offer falls short of Frontier’s true value. Analyst Jonathan Chaplin of New Street Research recently suggested Verizon could afford to pay at least $67 per share while still benefiting its shareholders.
The acquisition of Frontier is part of Verizon Chairman and CEO Hans Vestberg’s core strategy of growing and strengthening customer relationships. This transaction is expected to expand Verizon’s share of the nationwide broadband market.
This mounting resistance is a blow to Verizon Communication’s efforts to expand its market competitiveness, especially against rivals like AT&T and T-Mobile. The deal was initially seen as a strategic move to enhance Verizon’s position in the fiber broadband space, but the investor pushback now casts doubt over the acquisition’s future.
Baburajan Kizhakedath