- Cooper Investors sent an open letter to Frontier’s board objecting to the sale to Verizon
- Glendon Capital Management also reportedly opposes the deal
- And the analysts at New Street Research think Frontier should demand a higher price
More than one institutional shareholder of Frontier Communications says it opposes the sale of Frontier to Verizon for the price of $38.50 per share plus acquired debt, which equates to about $20 billion for the total deal.
Yesterday, Australia-based Cooper Investors sent an open letter to the board of directors of Frontier, expressing strong opposition to the proposed transaction because it thinks the standalone value of Frontier is as much as 62% higher than Verizon’s offer price and that the fair transaction value could be up to 94% higher.
Cooper Investors stated its intention to vote against approval of the deal and encouraged its fellow stockholders to do the same at Frontier’s upcoming special meeting on November 13.
Cooper’s letter says it thinks that the most optimal outcome for Frontier shareholders would be for it to remain as a standalone public company.
Sale opposition mounts
Earlier this week, Reuters reported that Glendon Capital Management, which owns nearly 10% of Frontier, thinks Verizon’s offer is too low, and it plans to oppose the sale.
In addition, Cerberus Capital Management, which owns 7.3% of Frontier, has privately expressed its view that the Verizon purchase price dramatically undervalues Frontier, according to Reuters.
New Street Research also has been urging Frontier shareholders to reject the deal at $38.50 and ask for a higher price. New Street makes the case that Frontier’s standalone value is at least $60 per share and that Verizon could comfortably pay at least $67 per share and still create value for its shareholders.
New Street wrote on October 8, “We think investors should refuse to vote in favor of the deal unless they receive a higher price.”
The analysts’ logic is that Verizon has committed itself to a shift in strategy toward more fiber, which will be hard for it to reverse, and Verizon can easily afford to pay more.
“Bidding tension for this asset will likely be higher later when the imperative for convergence has only grown,” wrote New Street. “We doubt Verizon will walk away, but even if they do, investors will be better off if they wait.”
If a group of shareholders decides to push for a higher price and achieve momentum, Verizon will have some incentive to boost its offer before the scheduled vote, said New Street, which also noted that the vote could potentially be delayed.
‘Cleanest exit’ for shareholders?
Converse to all the opposition to the deal, the analysts at BNP Paribas wrote yesterday that a proxy filing released in the last week by Frontier “makes it clear, in our view, that both AT&T and T-Mobile were offered the chance to acquire the company but were unwilling to offer a price near the $38.50 offered by Verizon.”
BNP added, “As a result, it is our view that a counter bid is a relatively low probability outcome, and hence while some shareholders clearly believe the offer price undervalues the company on a long-term view, we think the offer represents the cleanest exit for shareholders.”
