Verizon announced on Thursday that it will acquire Frontier Communications in an all-cash deal valued at $20 billion, a move aimed at strengthening its fiber network and enhancing its competitive position in the US telecommunications market.
Verizon offered $38.50 per Frontier share, representing a 37.3% premium over Frontier’s closing price on September 3, before reports of the acquisition surfaced. Following the announcement, Frontier shares dropped by over 9% in premarket trading, while Verizon’s stock rose by about 1%.
The acquisition, expected to close in approximately 18 months, will combine Frontier’s 2.2 million fiber subscribers across 25 states with Verizon’s 7.4 million Fios customers, largely concentrated in nine states and Washington, D.C. This merger will allow Verizon to better compete with major rivals like AT&T, expanding its geographic reach into regions where Frontier has a strong presence, including the Midwest, Texas, and California.
Verizon CEO Hans Vestberg described the deal as a “strategic fit” that would enhance Verizon’s fiber leadership and improve its competitiveness in more markets across the US He emphasized that the acquisition is expected to generate $500 million in annual cost synergies and contribute to the company’s revenue and adjusted earnings growth.
The deal also represents a shift in Verizon’s business strategy, as it reacquires assets it had sold to Frontier in a $10.54 billion deal in 2016, which included its TV and internet business in California, Texas, and Florida.
If the deal is terminated under certain conditions, Verizon has agreed to pay Frontier a $590 million termination fee. Both companies anticipate regulatory and shareholder approval for the transaction, which will significantly expand Verizon’s fiber network and service capabilities.
