Source: Investing Posted 21/10/2024, 16:10
DARYAN, Connecticut – Caronid Capital, an investment management firm that owns approximately 2 million shares in Frontier Communications Partners (NASDAQ: FYBR), has publicly opposed the proposed acquisition of Frontier by Verizon Communications. Caronid believes that the offer significantly underestimates the value of Frontier and does not represent fair value to shareholders.
In a letter to Frontier shareholders, Caronid clarifies its position against the current offer of $38.50 per share, proposing a material value of at least $48.60 per share for Frontier on an independent basis.
not counting potential synergies from the Verizon deal.
The company bases its valuation on analyses of past fiber transactions and Frontier’s current earnings before interest, tax, depreciation and amortization (EBITDA).
which, in their opinion, supports a higher share price.
Caronid also criticizes the proposed deal for giving Verizon Communications the majority of the benefits of synergy.
including operational cost savings, enhanced wireless business.
and new revenue opportunities through cross-selling and premium offerings. It argues that these benefits should fairly benefit Frontier’s shareholders.
The investment firm also expresses concern about what it sees as a hasty shareholder vote.
noting that the timing could prevent shareholders from fully evaluating the terms of the transaction. It highlights the lack of consultation with shareholders and the possibility that shareholders may realize the value they may forfeit if the transaction goes through on its current terms.
Caronid contacted shareholder consulting firms to share their views and urge other shareholders to vote against the acquisition unless a fairer share of the value of the joint venture is offered. This opposition comes amid a backdrop of recent fiber transactions that Caronide believes provide a benchmark for evaluating Frontier.
The company emphasizes that the unique size and fit of Frontier makes it a vital asset for Verizon Communications and that the fair deal should reflect the full value Frontier offers. Frontier Communications has undergone significant developments.
The company reported a 2% increase in revenue in the second quarter of 2024 earnings call to $1.48 billion, along with 5% growth in earnings before interest, tax, depreciation and amortization. Despite a net loss of $123 million, Frontier’s operating cash flow remained strong at $374 million.
Frontier also received seven grants CTed Communities by the Connecticut Department of Energy and Environmental Protection.
aims to extend high-speed fiber internet to underserved and underserved areas of the state. This reinforces Frontier’s commitment to improving digital infrastructure. However, Frontier’s rating has been downgraded to neutral by CITI, TD Cowen andMoffett Nathanson.
following the proposed acquisition offer from Verizon Communications.
which was opposed by Cooper Investors.
In addition, Frontier has received more than $23 million in grants to expand its high-speed fiber broadband service in San Bernardino and Riverside counties in California. These are the latest developments of Frontier Communications.
Recent data from Investing sheds more light on the financial position and market performance of Frontier Communications.
providing context for Caronid Capital’s opposition to the acquisition by Verizon Communications.
According to the latest available data, Frontier Communications has a market capitalization of $8.89 billion. The company’s revenue for the past twelve months through the second quarter of 2023 was $5.804 billion.
with modest revenue growth of 0.59% over the same period.
Investing tips highlight that Frontier has seen a strong return over the past three months.
with a total price return of 33.56%. This latest performance is in line with Caronid’s argument that the company may be undervalued at the current offer price. In addition, Frontier has seen a significant price rise over the past six months.
with a total return of 64.52%, further supporting higher valuation possibility.
However, it should be noted that Investing’s advice also indicates that Frontier operates with a significant debt burden and that its short-term liabilities exceed its liquid assets. These factors can affect the company’s independent valuation and negotiating position in the proposed acquisition.
