Verizon Communications has entered into an agreement to acquire pre-paid and value mobile service provider TracFone from America Movil in a cash-stock deal worth $6.25 billion. The company expects to complete the transaction in the second half of 2021.
Under the terms of the deal, Verizon (VZ) will pay $3.125 billion in cash and $3.125 billion in its common stock. America Movil will be eligible to receive an additional $650 million dependent on performance-based earn-out and the achievement of certain performance goals. The transaction is anticipated to be accretive in the first full-year following the completion.
Verizon Consumer Group CEO Ronan Dunne said, “Since its launch, Tracfone has developed strong consumer brands and has established itself as a clear leader in the value mobile segment. This transaction firmly establishes Verizon, through the Tracfone brands, as the provider of choice in the value segment, which complements our clear leadership in the premium segment.” (See VZ stock analysis on TipRanks).
Following the announcement, Raymond James analyst Frank Louthan said that “becoming the largest prepaid provider could attract additional scrutiny especially in conjunction with a potentially new administration in D.C. that could be less merger-friendly.” Louthan maintained his Buy rating on the stock as well as the price target of $64 (6.1% upside potential).
Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 6 Buys and 6 Holds. The average price target of $62.70 implies upside potential of about 4% to current levels. Shares are down about 1.8% year-to-date.
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