Is Verizon Communications (NYSE: VZ) about to open its wallet for a big recent acquisition?
That was the scuttlebutt on the stock market Wednesday, and on potential news that the incumbent telecom might spend a reasonably penny for a deal, investors traded out of its shares. In late-session trading Verizon’s price was down by nearly 4%, a more dramatic slide than the 0.4% sag of the S&P 500 index at the aim.
A possible deal that may easily top $10 billion
The Wall Street Journal published an article today stating that Verizon is way into discussions to amass broadband web specialist Frontier Communications (NASDAQ: FYBR). Citing unnamed “people accustomed to the matter,” the financial newspaper wrote that an announcement of a deal could come as soon as this week.
If realized, such a purchase order order will be sizable. On news of the potential deal, investors bid up Frontier’s stock sharply, pushing its market cap to over $9.5 billion. That is pricey even for a monster business with sustainably high levels of free money flow (FCF) like Verizon. The already heavily indebted company would almost actually should get hold of some outside sources of financing, as its money and short-term investments totaled under $3.8 billion on the tip of June.
In contemplating a Frontier buyout, it’s likely Verizon goals to be more competitive throughout the broadband segment. Mobile service providing isn’t exactly a hot growth area recently, while quite just a few regions of this country are still underserved by high-speed web.
Easy integration?
While integrating two large enterprises isn’t a quick or easy task, Verizon and Frontier are relatively compatible. The latter’s broadband operation, currently being upgraded to fiber technology from legacy copper wiring, roughly complements Verizon’s Fios network.
Neither Verizon nor Frontier has yet officially commented on the Journal article.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Idiot recommends Verizon Communications. The Motley Idiot has a disclosure policy.
Why Verizon Stock Was Wilting on Wednesday was originally published by The Motley Idiot