Verizon Communications (VZ) is facing hurdles in its bid to acquire Frontier Communications (FYBR). Glendon Capital Management, Frontier’s second-largest shareholder with a nearly 10% stake in the company, believes VZ’s offer of $38.50 per piece to be significantly undervalued. As a result, the investor plans to vote against the deal at the upcoming shareholder meeting on November 13.
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Another major shareholder, Cerberus Capital Management, with a 7.3% stake, has also expressed concerns about the deal’s valuation. While its voting plans are unclear, the investor’s position hints at possible resistance to the acquisition.
The $20 billion deal, including debt, offers a 44% premium to Frontier’s 90-day average share price. Verizon CEO Hans Vestberg sees the acquisition as a strategic move to enhance its competitive position in the market.
Verizon’s Efforts to Complete the Deal
To move forward with the acquisition, Verizon has secured a $10 billion bridge loan from a group of banks led by Morgan Stanley (MS). This short-term financing will provide the necessary capital to close the deal, which Verizon expects to finalize by March 2026.
Bridge loans are a typical financing method in mergers and acquisitions, often replaced by long-term options like investment-grade bonds after the deal is finalized.
However, despite these efforts, the acquisition faces challenges as key shareholders, such as Glendon and Cerberus, have voiced concerns over its valuation, making the upcoming shareholder vote a crucial step in determining its outcome.
Is Verizon Stock a Good Buy Right Now?
Turning to Wall Street, VZ has a Moderate Buy consensus rating based on eight Buys and 10 Holds assigned in the last three months. At $46.47, the average Verizon price target implies 7.59% upside potential. Shares of the company have gained more than 20% year-to-date.
