Exclusive-Verizon bid for Frontier faces investor skepticism, sources say By Reuters
Written by Svea Herbst-Bayliss
NEW YORK (Reuters) – Some of Frontier Communications' (OTC:)' major shareholders are worried about its planned $9.6 billion takeover Verizon Communications (NYSE:), whose second-largest investor plans to vote against the deal, three sources familiar with the firm's plans said.
Glendon Capital Management, which owns about 10% of Frontier, believes Verizon's $38.50 a share price is too low, the people said. With debt acquired, the deal could be worth $20 billion.
The investor plans to vote against it when the deal comes up for a shareholder vote on Nov. 13, the sources said. A majority of the remaining shares need to vote for the deal to be approved.
Separately, Cerberus Capital Management, which owns 7.3% of Frontier, has privately expressed its view that Verizon's purchase price undervalues Frontier, said people familiar with the investment firm's thinking. It was not yet clear how the investment firm would vote. A spokesman for Cerberus declined to comment.
Verizon and Frontier did not immediately respond to a request for comment. The sources requested anonymity to discuss internal discussions.
When the deal was announced last month, it represented a 44% premium to Frontier's 90-day volume-weighted average share price. Verizon CEO Hans Vestberg called the acquisition a “strategic fit” that will allow the company to be more competitive in additional markets. Management said the deal could take up to 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 nearly a year after activist investment firm Jana Partners said it had built a position in Frontier and was asking the third-largest US provider to sell them.
For Verizon the acquisition will help it better compete with rivals AT&T (NYSE: ) and T-Mobile as they double down on unlimited plans and bundle options.
The investors' comments come as some research analysts have also said that Verizon's price is low and that investors should wait because Frontier's assets will become more valuable in the long run.
“We think investors should refrain from voting for a deal unless they get a higher price,” New Street Research analyst Jonathan Chaplin wrote in a report last week. The report said Verizon “could well pay at least $67 and still create value for its shareholders.”
Ares Management (NYSE: ), Frontier's biggest investor with a 15.6% stake, declined to comment on its views on the deal or how it might vote next month.
