- Frontier is still planning a shareholder vote on November 13 to approve the purchase by Verizon
- But a number of investors object to the deal
- Now, Bell Canada’s purchase of Ziply provides a comparison that may make the Verizon offer look undervalued
The news that Bell Canada is buying fiber operator Ziply could be the final straw for Frontier shareholders who are hesitant to approve the sale of Frontier to Verizon.
Why? Because the Bell Canada/Ziply deal is valued at a premium over what Verizon is paying for Frontier, according to the analysts at New Street Research who have crunched the numbers.
New Street reported that Bell is paying a 55% to 117% premium for Ziply over what Verizon is paying for Frontier, for an asset that is very similar. The Ziply transaction will make it harder for Frontier investors to accept $38.50 per share and easier for Verizon to offer more, wrote New Street.
Frontier’s management has argued against other recent transactions like T-Mobile’s offers to buy Metronet and Lumos, claiming that the assets are not comparable.
“You couldn’t find a more comparable asset to Frontier than Ziply,” said New Street.
In fact, most of Ziply’s assets were acquired from Frontier in 2020.
In late October, Frontier’s management published a 32-page argument for why the deal with Verizon was a good deal for its shareholders. One of its points was that there are no other potential buyers at this time who would make sense.
What’s next for Verizon-Frontier?
Frontier is holding a special stockholder’s meeting on November 13 to vote on whether the company should sell to Verizon for $38.50 per share. However, a number of large Frontier investors are objecting to the sale because they say the price is too low.
The Frontier Board has not cancelled nor postponed the shareholder vote.
Fierce Network previously reported that institutional investors objecting to the sale include Cooper Investors, Glendon Capital Management and Cerberus Capital Management
Recently, Institutional Shareholder Services (ISS), a company that provides research, advice and voting recommendations advised that Frontier shareholders abstain from voting, which has the same effect as voting against the deal.
Frontier investor Carronade Capital Management has also said it won’t vote in favor of the transaction.
It’s possible that Frontier will move forward with its special shareholder’s meeting and it will fail to receive the necessary votes, or perhaps Verizon will come in with a higher priced-offer in light of the Bell-Ziply deal.
The New Street Analysts wrote, “It is much easier for Verizon to justify paying a higher price, with this transaction having printed. We think they can increase their offer enough to get shareholder support while still paying a discount to the Ziply transaction and demonstrate to their shareholders that they are getting a great deal.”
They speculate that if Verizon does walk away or Frontier shareholders don't approve the deal, there will eventually be a bidding war for Frontier within a couple of years and Bell Canada might even be one of the bidders.