Verizon To Buy Frontier Communications In $20B All-Cash Deal: Here’s How Retail Reacted

Verizon Communications Inc (VZ) is set to acquire pure-play fiber internet provider Frontier Communications Parent, Inc. (FYBR) in an all-cash transaction valued at $20 billion as it seeks to expand its fiber footprint across the nation and accelerate its delivery of premium mobility and broadband services to current and new customers.

Verizon will pay $38.50 per share in cash which represents a premium of 43.7% to Frontier’s 90-day volume-weighted average share price on Tuesday, the last trading day before media reports regarding the potential acquisition started doing rounds.

FYBR shares fell over 9% in Thursday’s pre-market session while Verizon shares were trading 0.77% higher.

The transaction has been unanimously approved by the Verizon and Frontier boards of directors and is expected to close in approximately 18 months.

Following the announcement, retail sentiment for Verizon on Stocktwits dipped into the ‘bearish’ territory (35/100) compared to ‘bullish’ a day ago.

Some investors were expressing concerns about the potential debt load created due to the acquisition.

However, retail followers of FYBR expressed optimism about the deal with the sentiment meter entering the ‘extremely bullish’ territory (97/100), hitting a one-year high.

Verizon said it expects to realize at least $500 million in run-rate cost synergies by the third year from benefits of increased scale and distribution and network integration.

The firm pointed out that over the last four years, Frontier has invested $4.1 billion upgrading and expanding its fiber network, and now derives more than 50% of its revenue from fiber products. Following the acquisition, Frontier’s 2.2 million fiber subscribers across 25 states will join Verizon’s approximately 7.4 million Fios connections1 in nine states and Washington, D.C.

Meanwhile, the Verizon board announced a quarterly dividend of $0.68 per outstanding share, payable on Nov. 01, 2024, to shareholders of record at the close of business on Oct. 10, 2024.