DARIEN, Conn. - Carronade Capital, an investment management firm holding approximately 2 million shares of Frontier Communications (OTC:FTRCQ) Parent, Inc. (NASDAQ: FYBR), has publicly opposed the proposed acquisition of Frontier by Verizon Communications Inc (NYSE:VZ). (Verizon). Carronade believes the offer significantly undervalues Frontier and fails to represent fair value to shareholders.
In a letter to fellow Frontier shareholders, Carronade outlines its position against the current offer of $38.50 per share, suggesting an intrinsic value of at least $48.60 per share for Frontier on a standalone basis, not accounting for potential synergies from a Verizon transaction. The firm bases its valuation on precedent fiber transaction analyses and Frontier's current EBITDA, which they argue supports a higher share price.
Carronade also criticizes the proposed transaction for granting Verizon the majority of synergy benefits, including operational cost savings, enhanced wireless business, and new revenue opportunities through cross-selling and premium offerings. They argue that these benefits should equitably benefit Frontier shareholders.
The investment firm also expresses concern over what it perceives as a rushed shareholder vote, suggesting that the timing may prevent shareholders from fully evaluating the deal's terms. They highlight the lack of shareholder consultation and the potential for shareholders to realize the value they might be forfeiting if the transaction proceeds under its current terms.
Carronade has reached out to shareholder advisory firms to share its views and is urging other shareholders to vote against the acquisition unless a fairer share of the combined enterprise's value is offered.
This opposition comes amidst a backdrop of recent fiber transactions that Carronade believes provide a benchmark for Frontier's valuation. The firm emphasizes that the unique scale and fit of Frontier make it a critical asset for Verizon and that a fair transaction should reflect the full value Frontier brings to the table.
The information in this article is based on a press release statement from Carronade Capital.
In other recent news, Frontier Communications has seen significant developments. The company reported a 2% revenue increase in its Q2 2024 earnings call, reaching $1.48 billion, along with a 5% growth in EBITDA. Despite a net loss of $123 million, Frontier's operational cash flow remained robust at $374 million. Frontier has also been awarded seven ConneCTed Communities grants by the Connecticut Department of Energy and Environmental Protection, aimed at expanding high-speed fiber internet to unserved and underserved areas in the state. This reinforces Frontier's commitment to improving digital infrastructure. However, Frontier has been downgraded to Neutral by Citi, TD Cowen, and MoffettNathanson, following Verizon Communications Inc.'s proposed acquisition, which has been opposed by Cooper Investors. In addition, Frontier has secured over $23 million in grants for expanding high-speed fiber broadband service in California's San Bernardino and Riverside counties. These are the recent developments for Frontier Communications.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Frontier Communications' financial position and market performance, providing context to Carronade Capital's opposition to the Verizon acquisition.
As of the latest available data, Frontier Communications has a market capitalization of $8.89 billion. The company's revenue for the last twelve months as of Q2 2023 stood at $5.804 billion, with a modest revenue growth of 0.59% over the same period.
InvestingPro Tips highlight that Frontier has seen a strong return over the last three months, with a price total return of 33.56%. This recent performance aligns with Carronade's argument that the company may be undervalued at the current offer price. Additionally, Frontier has experienced a large price uptick over the last six months, with a total return of 64.52%, further supporting the potential for a higher valuation.
However, it's worth noting that InvestingPro Tips also indicate that Frontier operates with a significant debt burden and that its short-term obligations exceed liquid assets. These factors could influence the company's standalone valuation and negotiating position in the proposed acquisition.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for Frontier Communications, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.