Some of Frontier Communications’ largest shareholders have expressed concerns about the company’s planned acquisition by Verizon Communications – a deal worth an estimated $9.6 billion, reports claim.
Glendon Capital Management, the company’s second-largest investor, is believed to be planning to vote against the deal, according to unnamed sources familiar with the matter cited by Reuters.
Glendon owns nearly 10% of all Frontier shares and believes Verizon’s offer of $38.50 per share undervalues the company. It will therefore reject the bid in a vote scheduled for November 13.
Verizon-Frontier takeover risk
Approval will require a majority vote, and Glendon’s important role, combined with his potential influence over other shareholders, could tip the vote in favor of a higher valuation.
Cerberus Capital Management, another investor that owns 7.3% of Frontier, has also raised concerns about the deal, it says ReutersHowever, how the company will vote remains unconfirmed.
The deal, announced last month, already offered a 44% premium to Frontier’s 90-day volume-weighted average share price. Depending on a positive vote and subsequent regulatory approval procedures, the acquisition could take up to 18 months.
Despite the healthy premium, investors and analysts suggest the valuation is still too low, with New Street Research analyst Jonathan Chaplin indicating the company could “comfortably” push for a deal at $67 per share.
It is unclear how Ares Management, Frontier’s largest investor with a 15.6% stake, will cast its vote.
When the deal was first unveiled, Verizon CEO Hans Vestberg described the merger as a “strategic combination” that would help both telecom companies become more competitive in the US.