Frontier Communications stock price surges, then crashes, on Verizon acquisition news

Shares in Frontier Communications Parent have been on a wild ride over the past 24 hours. The stock (ticker: FYBR) saw its price surge a staggering 37% to $38.68 per share after reports that communications giant Verizon was looking to buy the company.

But this morning, when Verizon officially announced its plans to acquire Frontier, FYBR shares sank over 10% in premarket trading at the time of this writing. Here’s what you need to know about the Verizon-Frontier acquisition.

What’s happened?

Verizon has announced it plans to acquire Frontier. It is doing so because it wants to expand its fiber internet network across the country and use its increased fiber footprint to offer premium broadband and mobile services to more customers.

What does Verizon get out of the deal?

It gets millions of more customers and access to customers in additional states. Verizon’s Fios internet service currently counts 7.4 million connections in nine states and Washington, D.C. By acquiring Frontier, Verizon will get an additional 2.2 million fiber customers across 25 states.

If the deal goes through, Verizon will then have a broadband customer base of over 11 million across 31 states. The company can then bundle its broadband and mobile services together across many more states, hopefully picking up new mobile customers who want a one-stop shop for their home and mobile internet needs.

What does Frontier get out of the deal?

Frontier gets $20 billion in an all-cash transaction.

What has Verizon said about the acquisition?

In a statement, Verizon CEO Hans Vestberg said, “The acquisition of Frontier is a strategic fit. It will build on Verizon’s two decades of leadership at the forefront of fiber and is an opportunity to become more competitive in more markets throughout the United States, enhancing our ability to deliver premium offerings to millions more customers across a combined fiber network.”

What has Frontier said about the acquisition?

In a statement, Frontier CEO Nick Jeffery said, “Today’s announcement is recognition of our progress building a best-in-class fiber network and delivering reliable, high-speed broadband to millions of customers across the country. It’s also a vote of confidence for the future of fiber. I am confident that this delivers a significant and certain cash premium to Frontier’s shareholders, while creating exciting new opportunities for our employees and expanding access to reliable connectivity for more Americans.”

What does this deal mean for Frontier’s existing shareholders?

If the deal goes through, shareholders will receive $38.50 per share in cash for every share of FYBR. Verizon says this is a 43.7% premium over Frontier’s 90-day volume-weighted average share price as of September 3, 2024, the day before reports emerged of the acquisition deal.

Why did FYBR shares surge yesterday?

FYBR shares went up over 37% yesterday, likely on news that an acquisition was in the works. If one company buys another, the buying company usually pays a premium over the existing share price. So, upon hearing the news that Verizon may buy Fronteir, investors rushed to buy FYBR shares.

So then why are FYBR shares down today?

The most likely reason that FYBR shares are down in premarket this morning is that Verizon has put a firm price on what it will pay for FYBR shares: $38.50.

Is the Verizon-Frontier acquisition a done deal?

Not yet, even though the boards of both companies have agreed to it. Frontier shareholders and regulators still need to agree to the deal, too. The companies say they expect the deal to close in 18 months.