Verizon said on Thursday that it has struck a deal to buy Straight Path Communication for about $3.1bn, winning out in a bidding war with AT&T.
Verizon will pay $184 a share in an all stock transaction — a 404 per cent premium to the closing stock price of $36.48 it reached the day before Straight Path entered into a merger agreement with AT&T.
AT&T had last month offered $1.6bn for Straight Path, which specialises in millimetre wave communications that could potentially become valuable in the push for 5G networks. Verizon will pay a termination fee of $38m to AT&T on behalf of Straight Path.
“Though a significant premium to AT&T’s initial offer, the deal value does not seem hefty to secure a sizable spectrum position to support 5G efforts for the foreseeable future,” Mike McCormack, an analyst at Jefferies, said. “Combined with spectrum available through XO, Verizon now has access to a vast majority of commercially available high frequency spectrum.”
The deal is subject to review by the Federal Communications Commission and is expected to close within nine months.
Straight Path shares were down more than 20 per cent in pre-market trade to $175.94, below Verizon’s offer price. Verizon shares were down by less than 1 per cent.