Some of Frontier Communications’ largest shareholders have voiced concerns over the company’s planned takeover by Verizon Communications – a deal worth an estimated $9.6 billion, reports have claimed.
Glendon Capital Management, the company’s second-largest investor, allegedly plans to vote against the deal according to unnamed sources familiar with the matter cited by Reuters.
Accounting for nearly 10% of all Frontier shares, Glendon believes Verizon’s offer of $38.50 per share undervalues the company, thus it will reject the offer during a vote planned for November 13.
Verizon-Frontier acquisition risk
The deal will require a majority vote in favor for approval, and Glendon’s significant role combined with its potential influence on other shareholders could sway the vote in favor of pushing for a higher valuation.
Cerberus Capital Management, another investor accounting for 7.3% of Frontier, has also expressed concerns about the deal, says Reuters, however how the firm will vote remains unconfirmed.
The deal, announced last month, already offered a 44% premium to Frontier’s 90-day volume-weighted average share price. Subject to a vote in favor, and subsequent regulatory approval processes, the acquisition could take up to 18 months.
Despite the healthy premium, investors and analysts are suggesting that the valuation is still too low, with New Street Research analyst Jonathan Chaplin indicating that the company could push for a $67-per-share deal “comfortably.”
It’s unclear how Ares Management, Frontier’s leading investor with a 15.6% stake, will cast its vote.
When the deal was first revealed, Verizon CEO Hans Vestberg described the merger as a “strategic fit” that would help both telecomms companies become more competitive across the US.
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