Verizon said on Thursday it would buy Border communication in a cash deal valued at $20 billion as the U.S. wireless carrier looks to expand its fiber-optic network.
Verizon offered $38.50 per share, a 37.3 percent premium to Frontier’s closing price on Sept. 3, a day before reports of a possible takeover surfaced. As of June 30, Frontier had $11.25 billion in debt.
Frontier shares, which rose nearly 38% in the previous session, fell below Verizon’s offer price to $35.14 in premarket trading, while Verizon gained about 1%.
The acquisition, which is expected to close in about 18 months, will help Verizon better compete with AT&T and others by enabling the delivery of world-class broadband services.
Frontier has 2.2 million fiber optic subscribers in 25 states, combined with Verizon’s approximately 7.4 million FiOS connections in nine states and Washington, DC.
In 2016, Verizon sold its TV and internet business in California, Texas and Florida to Frontier for $10.54 billion. This also included some of its FiOS fiber optic networks and customers.
Verizon’s fiber optic network now covers most of the Northeast and Mid-Atlantic region, while Frontier’s coverage extends across several Midwestern states, Texas, California and others.
“The acquisition of Frontier is a strategic decision. It builds on Verizon’s twenty years of leadership and is an opportunity to become more competitive in more markets in the United States,” said Verizon CEO Hans Vestberg.
The deal is expected to deliver at least $500 million in annual cost savings by the third year and be accretive to Verizon’s revenue and adjusted earnings.
If the deal is terminated under certain conditions, Verizon will pay Frontier a fee of $590 million.
Verizon also kept its full-year forecasts for profit and wireless service revenue unchanged. In July, the company missed market forecasts for revenue and reported a sharp decline in the number of prepaid customers as federal internet subsidies were phased out.
Centerview Partners and Morgan Stanley served as financial advisors to Verizon, while Barclays advised Frontier.
