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Verizon Communications Inc. (VZ) entered a merger agreement on September 5, 2024, to acquire Frontier Communications (FYBR) in an all-cash deal worth $20 billion.
As per the agreement, Verizon will acquire Frontier for $38.50 per share in cash, representing a discount of 0.47% from the stock’s last close, as reports of the potential merger were made public a day earlier. The price represents about a 35% premium from the stock’s last 30-day average.
The transaction value of $20 billion includes Frontier’s debt of $11.25 billion.
If the deal falls through under specific conditions, Verizon will pay Frontier $590 million, or Frontier will pay Verizon $320 million, depending on who cancels the deal.
Frontier is the largest pure-play fiber provider in the U.S., offering high-speed broadband, video, voice, and other communication and technology services to consumers, businesses, and wholesale customers.
Verizon is a global communications and technology provider offering wireless and wireline services, including broadband, voice, and data solutions, to consumers, businesses, and government entities.
Frontier has 2.2 million fiber subscribers across 25 states, which will merge with Verizon’s approximately 7.4 million FiOS connections in nine states and Washington, D.C.
Frontier’s current EV/EBITDA (TTM) ratio is 8.72, below the sector median of 10.16.
In 2016, Verizon sold its TV and internet business in California, Texas, and Florida to Frontier for $10.54 billion. The deal included part of its FiOS fiber networks and customer base.
Verizon’s fiber network is now primarily concentrated in the Northeast and Mid-Atlantic regions, while Frontier’s coverage extends across several states in the Midwest, Texas, California, and others.
“The acquisition of Frontier is a strategic fit. It is an opportunity to become more competitive in more markets throughout the U.S.,” Verizon CEO Hans Vestberg said.
The deal, which should be completed in about 18 months, is expected to save at least $500 million a year by the third year. It will also boost Verizon’s revenue and profit.
Last year, Frontier initiated a search for strategic alternatives after activist investment firm Jana Partners acquired a stake in the company and pressured it to consider a sale.
Further details regarding this major merger can be found on the Deal Metrics page:
The Deal Metrics page provides a comprehensive overview of the merger, including:
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Editor’s Note: Baranjot Kaur contributed to this article