Frontier shareholders approve Verizon takeover

The US fibre network operator put the proposed deal to shareholders on Wednesday, just days after it was forced to defend the T&Cs of the transaction it inked in September. There have been rumblings of discontent from some shareholders for the past couple of weeks that culminated in proxy advisory firms ISS and Glass Lewis recommending that stockholders abstain from the vote.

Abstention effectively means opposition, as Frontier reminded investors last Thursday when it published a missive challenging ISS and Glass Lewis' position that they could – and should – hold out for a better deal.

Frontier's Board of Directors believes that Verizon’s all-cash offer of $38.50 per share is highly attractive and creates significant, certain value for stockholders, reflecting a 37% premium to Frontier's pre-announcement price and an even more significant premium to all other measures of Frontier's historical stock performance," the operator said in response to the proxy firms.

"This outcome was the result of an exhaustive and competitive process that drove a 17% to 28% improvement in value from Verizon's initial bid range, a significant premium to the only other bidder, and a 60% premium to Frontier;s share price on February 2, 2024, the last trading day prior to the Frontier's Board and management team's announcement of a formal and comprehensive review process of all opportunities to unlock shareholder value," it insisted.

Or to put it simply, Verizon is already paying more than it wanted to and more than anyone else was willing to cough up.

For good measure Frontier added that, having been in close communication with Verizon, it "has received every indication that there will be no change to the merger consideration." Verizon won't go higher, that is.

That last point may well have swung the vote.

Approximately 63% of stockholders voted in favour of deal, with 10 of the firm's top 12 stockholders giving it the green light, Frontier confirmed on Wednesday.

"Today's vote demonstrates the strong value of the fibre business we have built over the past four years and our ability to expand access to reliable connectivity for more Americans," said Frontier CEO Nick Jeffery, in a statement that pretty much sums up Verizon's rationale for shelling out $20 billion.

The US fibre market is burgeoning. While Verizon is looking to buy footprint, arch-rival AT&T is building – it inked a $1 billion-plus deal with glass maker Corning just a fortnight ago – and seeking help from neutral hosts. And T-Mobile US announced a partnership with KKR to acquire fibre operator Metronet, which covers 2 million homes and businesses, in July, pledging to spend the best part of $5 billion for its share.

The race is on. But while Verizon will gain 7.2 million premises passed and a fibre customer base of 2.2 million through the Frontier deal, it will not be a particularly quick fix. When it and Frontier announced the deal in September they indicated that they were working to an 18-month timeframe for completion, and that appears still to be the case.

"We look forward to closing this transaction by the first quarter of 2026 and beginning to deliver our premium fibre offering to millions more customers across our combined network," Jeffery said.