By (Reuters) -Verizon said on Thursday it would buy Frontier Communications (OTC:FTRCQ) in an all-cash deal valued at $20 billion, as the U.S. wireless carrier looks to boost its fiber network.
Shares of Frontier Communications fell more than 9% in premarket trading. Verizon (NYSE:VZ) climbed about 1%.
Verizon has offered $38.50 per Frontier share held, a premium of 37.3% to Frontier’s closing price on Sept. 3, before reports of a potential acquisition emerged.
The acquisition, which is expected to close in about 18 months, will help Verizon better compete against AT&T (NYSE:T) and others by enabling it to deliver premium broadband services to existing as well as new customers.
Frontier has 2.2 million fiber subscribers across 25 states, which will combine with Verizon’s about 7.4 million Fios connections in nine states and Washington, D.C.
Verizon’s fiber network is largely in the North East and mid-Atlantic regions, while Frontier’s coverage spans multiple states in the Mid West, Texas, California and others.
“The acquisition of Frontier is a strategic fit. It will build on Verizon’s two decades of leadership … and is an opportunity to become more competitive in more markets throughout the United States,” Verizon CEO Hans Vestberg said in a statement.
The deal is projected to generate at least $500 million in annual run-rate cost synergies, and will add to Verizon’s revenue and adjusted earnings before interest, tax, depreciation, and amortization growth upon closing.