Frontier disagrees with a pair of proxy advisors' recommendation that shareholders abstain from voting on Verizon's proposed acquisition. If shareholders reject the deal, Frontier will focus on its standalone plan.
Frontier Communications said Thursday it disagrees with a recommendation from two proxy advisers that shareholders should abstain from voting on Verizon's proposed bid of $38.50 per share for Frontier.
Frontier's board reiterated its recommendation that stockholders vote for the proposed transaction with Verizon on November 13, holding that the all-cash offer is "highly attractive" and reflects a 37% premium to the company's pre-announcement price. If shareholders reject the deal, Frontier intends to return to its standalone plan, which includes a fiber buildout to 10 million homes and businesses.
On October 25, Frontier issued a stockholder presentation stating why it believes the proposed transaction, which resulted from an "exhaustive and competitive process," is in the best interests of Frontier shareholders. The presentation also outlined why Frontier believes the Verizon deal holds superior value over other paths, including the standalone plan.
The proxy advisers – Institutional Shareholder Services (ISS) and Glass Lewis – issued their recommendation to abstain earlier in the week.
"Given the possibility of substantially more value down the line, and the lack of urgency to approve a transaction...it seems reasonable for shareholders to exercise the optionality of abstaining for the time being," ISS said, according to Reuters.
Frontier is also facing hurdles erected by other shareholders who believe Verizon's offer undervalues Frontier. Glendon Capital, which owns 10% of Frontier's outstanding shares, said it would vote against the deal on those grounds, as did Cooper Investors Pty Limited, which owns about 800,000 Frontier shares, and Carronade Capital, which owns roughly 2 million shares.
Cerberus Capital Management, which has a 7.3% stake in Frontier, has "privately expressed" that Verizon's proposal undervalues Frontier but has not revealed how it will vote, according to Reuters. Ares Management, Frontier's largest shareholder with almost 16% of shares, has reportedly hired Houlihan Lokey to help it evaluate Verizon's offer.
Verizon is not expected to raise its bid
Echoing an earlier report from CNBC, Frontier doesn't expect Verizon to raise its bid.
"Since the announcement of the transaction, Frontier has been in close communication with Verizon and has received every indication that there will be no change to the merger consideration," Frontier said.
Frontier needs a majority vote from shareholders to approve the deal.
"An abstention from voting is effectively a vote against the deal," Frontier said. "If the transaction is voted down by Frontier stockholders at the special meeting, the merger agreement may be terminated immediately by either Verizon or Frontier without penalty. If Frontier stockholders decline to approve the proposed transaction on November 13, Frontier will return its full attention to its standalone plan."
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