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Verizon To Acquire Frontier Communications For $20 Billion

U.S. telecommunications giant Verizon (VZ) is acquiring rival Frontier Communications (FYBR) in an all-cash deal valued at $20 billion U.S.

In a news release, Verizon said it is undertaking the acquisition to boost its fibre optic network across America.

Verizon has offered $38.50 U.S. per share for Fronter Communications, representing a premium of 37% over Frontier stock’s price on Sept. 3 before media reports of a takeover surfaced.

The acquisition is expected to close within 18 months and help Verizon better compete against archrival AT&T (T) for in-demand broadband services.

Frontier Communications currently has 2.2 million fibre subscribers in 25 states, which will combine with Verizon’s 7.4 million Fios connections in nine states and Washington, D.C.

Verizon’s current fibre optic network is situated in the Northeast and mid-Atlantic regions of the U.S., while Frontier’s coverage spans Texas, California and other western areas of the country.

The deal is projected to generate at least $500 million U.S. in annual cost synergies and will add to Verizon’s revenue and earnings going forward.

The purchase of Frontier Communications is subject to regulatory approval.

Verizon’s stock is up about 1% on news of the deal and trading at $41.80 U.S. per share.

Frontier’s stock jumped 38% as reports of the takeover emerged. Its shares are currently trading at $38.68 U.S. each.