Carronade Capital Urges Frontier Communications Shareholders to Vote Against Sale to Verizon on Current Terms

Core Argument - Carronade Capital believes Verizon's offer of $38.50 per share for Frontier Communications is insufficient compared to Frontier's intrinsic value of at least$48.60 per share [2] - The proposed transaction does not represent fair value to Frontier shareholders, and Carronade encourages shareholders to vote against it [2] Financial Analysis - Third-party analyses support a higher standalone valuation range for Frontier, with estimates ranging from $47.88 to$60+ per share before synergy value [2] - Recent fiber transactions have been valued at low to mid 20's x TEV/EBITDA, and applying a discounted multiple of 15x to Frontier's Fiber EBITDA supports a $48.60 per share valuation [3] - The conservative valuation excludes value from Frontier's non-fiber business, which generated$756 million in LTM EBITDA [3] Synergy Analysis - Verizon expects at least $500 million in opex run-rate synergies, with potential for more, including capex synergies [4] - Verizon anticipates a 50% reduction in mobility churn and a 40% reduction in fiber churn, leading to immediate revenue and EBITDA accretion [4] - Verizon plans to extend premium offerings to Frontier's customers and generate revenue from mobile and home conversions, including cross-selling benefits [4] Strategic Importance - Frontier provides Verizon with a combined 25 million fiber passings in 31 states and Washington DC, significantly expanding Verizon's fiber footprint [5] - The acquisition accelerates Verizon's delivery of premium mobility and broadband services and powers its Intelligent Edge Network for digital innovation like AI and IoT [5] - Verizon views the acquisition as accretive from day one on revenue growth and EBITDA, with EPS and cash flow accretion expected within a year [5] Shareholder Concerns - The proxy process appears rushed, with the final proxy filed after market close on October 7, 2024, and the record date set for the same day, limiting shareholder review [6] - The lengthy regulatory approval process and expected inflection in Frontier's results suggest shareholders should have more time to evaluate the transaction [7] Conclusion - Carronade Capital intends to vote against the proposed transaction and encourages other shareholders to do the same until a fair share of the value created by the combined enterprise is offered [7][8]