Several of Frontier Communications’ (NASDAQ: FYBR) large shareholders are concerned that its planned $9.6 billion takeover by Verizon Communications (NYSE: VZ), is not sufficient, and its second-largest investor is planning to vote against the deal, Reuters reported. Glendon Capital Management, which owns nearly 10 percent of Frontier, believes Verizon’s $38.50 per share offer is too low. With acquired debt, the deal would be valued at $20 billion, Inside Towers reported. As the offer is structured, a majority of outstanding shares need to vote in favor of the deal for it to be approved when the deal comes up for shareholder vote on November 13.
Separately, Cerberus Capital Management, which holds a 7.3 percent share, has privately expressed its view that the Verizon purchase price dramatically undervalues Frontier, according to sources familiar with the investment firm’s position. Cerberus has not indicated publicly how it would vote. Ares Management, Frontier’s biggest investor with a 15.6 percent stake, did not comment on Verizon’s price or how it may cast its vote next month.
When the deal was announced last month, it represented a 44 percent premium to Frontier’s 90-day volume-weighted average share price. Verizon CEO Hans Vestberg called the acquisition “a strategic fit” that would allow the company to be more competitive in additional markets outside of Verizon’s primary operating territory. Verizon is trying to mount a response as AT&T (NYSE: T) and T-Mobile (NASDAQ: TMUS) are doubling down on unlimited plans, and wireless and fiber bundling options.
Management has said the deal could take 18 months to close. Frontier’s stock closed at $35.25 on Monday, more than $3 below the proposed deal price. Verizon announced the deal almost a year after activist investment firm Jana Partners said it had built a position in Frontier and was calling on the third-largest U.S. fiber broadband provider to sell itself.
Some research analysts have also said Verizon’s price is low and that investors should wait because Frontier’s assets will become more valuable over time.
“We think investors should refuse to vote in favor of the deal unless they receive a higher price,” New Street Research analyst Jonathan Chaplin wrote in a report last week, claiming that Verizon could “comfortably pay at least $67 and still create value for its shareholders.”
By John Celentano, Inside Towers Business Editor
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