Verizon's planned acquisition of Frontier Communications for $20 billion faces a critical shareholder vote, as some major shareholders push for a significant increase in the purchase price. Glendon Capital Management and Cerberus Capital Management, which together hold around 17 percent of Frontier's shares, are demanding at least 30 percent more than the currently offered $38.50 per share. They argue that the long-term growth prospects in the fiber optic business justify a significantly higher value.
A comparison with BCE's recent acquisition of the fiber network operator Ziply for $3.6 billion has further increased the pressure, as Frontier investors are now drawing parallels. According to internal calculations by the shareholders, Frontier is worth up to $50 per share due to the expected growth. Ares Management, the largest shareholder with around 15 percent, has not yet made its position on the vote clear and has commissioned the investment bank Houlihan Lokey for the evaluation.
Verizon's offer from September represented a premium of 44 percent over the stock price at that time. Nonetheless, the company remains with this offer price so far and emphasizes that the offer is fair. Should the takeover fail, Frontier plans to continue its independent business development.
Observers are skeptical whether the shareholders' demands are justified. "Frontier shareholders have the choice between $38.50 in cash per share or a future as an independent company with all its risks and opportunities," wrote Nick Del Deo from MoffettNathanson in an analysis.
The stance of the influential proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis further increases tensions: Both advise shareholders to abstain, which is effectively considered a rejection of the offer. ISS stated that investors could "expect more value and should use the option to abstain.
Frontier War 2020 Declared Bankruptcy Due to Heavy Debt and Attempted a Stock Market Relaunch in 2021 After Restructuring Under New Creditors. Since Then, Investors Like Ares, Cerberus, and Glendon Have Significantly Shaped the Business.
With the growing competition in the telecommunications industry, as recent acquisitions by T-Mobile and private equity firms show, the pressure is increasing on providers like Frontier to invest in fiber optic networks to keep up with cable operators. The demand for broadband is growing, driven by the increasing data needs and new AI applications.
