Verizon To Acquire Frontier In $20B Deal, Reaffirms FY24 Outlook

Frontier Communications Parent, Inc. FYBR shares are trading lower after the company inked an acquisition deal with Verizon Communications Inc. VZ.

As per the terms, Verizon will acquire Frontier in an all-cash deal valued at $20 billion.

In particular, Verizon will acquire Frontier for $38.50 per share in cash, a 43.7% premium over Frontier’s 90-day volume-weighted average share price (VWAP) as of September 3, 2024.

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The acquisition will integrate Frontier’s advanced fiber network with Verizon’s extensive fiber and wireless assets, including Fios. Frontier’s 2.2 million fiber subscribers and 7.2 million fiber locations will join Verizon’s 7.4 million Fios connections.

This strategic buyout, involving the largest pure-play fiber internet provider in the U.S., will significantly enhance Verizon’s fiber footprint nationwide, boost its delivery of premium mobility and broadband services, and expand its intelligent edge network for digital innovations like AI and IoT.

Frontier has invested $4.1 billion in its fiber network over the past four years and plans to expand by an additional 2.8 million fiber locations by 2026.

The transaction has received unanimous approval from the Boards of Directors of both Verizon and Frontier.

The deal is expected to close in about 18 months, pending approval by Frontier shareholders, regulatory approvals, and other customary closing conditions.

Synergies: The transaction is expected to boost Verizon’s revenue and Adjusted EBITDA growth rates upon closing.

Verizon anticipates achieving at least $500 million in annual cost synergies through increased scale, distribution, and network integration by year three.

Outlook: Verizon reaffirmed FY24 guidance for wireless service revenue growth of 2.0% to 3.5%, adjusted EBITDA growth of 1.0% to 3.0%, and adjusted EPS of $4.50 to $4.70 (vs. cons. of $4.57).

The company reiterated the capital expenditures of $17.0 billion-$17.5 billion in FY24.

Investors can gain exposure to the stock via Invesco S&P 500 Equal Weight Communication Services ETF RSPC and SPDR S&P Telecom ETF XTL.

Price Action: FYBR shares are down 9.72% at $34.92 premarket at the last check Thursday. VZ shares are up 1.21% to $41.98.

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