Verizon has entered into an agreement to acquire Frontier Communications in an all-cash transaction valued at $20 billion as it looks to expand its fiber network.
Under the terms of the agreement, Verizon will acquire Frontier for $38.50 per share in cash, representing a premium of 43.7% to Frontier’s 90-day volume-weighted average share price (VWAP) on Sept. 3, the last trading day prior to media reports regarding a potential acquisition of Frontier.
The deal will increase the telecommunications giant’s scale with 2.2 million fiber subscribers across 25 states from Frontier joining approximately 7.4 million Verizon Fios connections in 9 states and Washington D.C. Together, the wireless carrier’s reach will extend to 25 million premises across 31 states and Washington D.C.
“The acquisition of Frontier is a strategic fit,” Verizon chairman and CEO Hans Vestberg said in a statement. “It will build on Verizon’s two decades of leadership at the forefront of fiber and is an opportunity to become more competitive in more markets throughout the United States, enhancing our ability to deliver premium offerings to millions more customers across a combined fiber network.”
Over the past four years, Frontier has invested $4.1 billion in upgrading and expanding its fiber network and now derives more than 50% of its revenue from fiber products. In addition to Frontier’s 7.2 million fiber locations, the company is committed to a plan to build out an additional 2.8 million fiber locations by the end of 2026.
Frontier president and CEO Nick Jeffery said that the deal is a “vote of confidence for the future of fiber.”
“I am confident that this delivers a significant and certain cash premium to Frontier’s shareholders, while creating exciting new opportunities for our employees and expanding access to reliable connectivity for more Americans,” Jeffery added.
The transaction, which has been unanimously approved by Verizon and Frontier’s boards of directors, is expected to close in 18 months, subject to Frontier shareholder approval, receipt of certain regulatory approvals and other customary closing conditions.
Verizon expects the deal to be accretive to revenue and adjusted EBITDA growth upon closing and to realize at least $500 million in run-rate cost synergies by the third year of the deal from “benefits of increased scale and distribution and network integration.”
Looking ahead, Verizon reaffirmed its full year 2024 guidance of total wireless service revenue growth of 2% to 3.5%, adjusted EBITDA growth of 1% to 3%, adjusted earnings per share growth of $4.50 to $4.70 and capital expenditures between $17 billion and $17.5 billion.
Shares of Frontier fell 9.5% in pre-market trading on Thursday, while Verizon was up 0.048% following the deal announcement.
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