08:55 AM EDT, 09/05/2024 (MT Newswires) -- Verizon Communications ( VZ ) on Thursday agreed to purchase Frontier Communications Parent ( FYBR ) in an all-cash deal worth about $20 billion, as the company looks to boost its fiber network.

The telecommunications giant will pay $38.50 a share in cash for Frontier, the companies said in a joint statement. The price represents a premium of about 44% to the fiber internet provider's 90-day volume-weighted average share price as of Tuesday, the last trading day before speculation of a potential deal emerged. Verizon's stock gained 0.5% in premarket activity, while Frontier dropped 9.5%.

"The acquisition of Frontier is a strategic fit," Verizon Chief Executive Hans Vestberg said in the statement. The deal offers the company a chance to become "more competitive in more markets" throughout the US, according to Vestberg.

The transaction, which requires approval from regulators as well as from Frontier's shareholders, is expected to be completed in roughly 18 months.

"I am confident that this delivers a significant and certain cash premium to Frontier's shareholders, while creating exciting new opportunities for our employees and expanding access to reliable connectivity for more Americans," Frontier CEO Nick Jeffery said.

Verizon expects the acquisition to grow its footprint in the US, give it access to new customers and expand its intelligent edge network for artificial intelligence and internet-of-things. Frontier's 2.2 million fiber subscribers across 25 states are projected to join Verizon's 7.4 million Fios connections in nine states and Washington, DC. Frontier also plans to build 2.8 million more fiber locations by the end of 2026.

The transaction is estimated to be accretive to Verizon's revenue and adjusted earnings before interest, taxes, depreciation and amortization growth rates upon completion, according to the statement. Verizon also anticipates to generate at least $500 million in run-rate cost synergies by the third year, benefiting from increased scale and distribution and network integration.

Verizon reiterated its full-year 2024 adjusted earnings outlook of $4.50 to $4.70 per share and wireless service revenue growth of 2% to 3.5%. The current consensus on Capital IQ is for normalized EPS of $4.56.

Price: 41.66, Change: +0.18, Percent Change: +0.43