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Verizon trumps AT&T to buy spectrum holder Straight Path

Posted by: Admin | Posted on: May 11th, 2017 | 0 Comments

Verizon Communications Inc (VZ.N) snapped up wireless spectrum holder Straight Path Communications Inc (STRP.A) in a $3.1 billion deal, trumping rival ATT’s (T.N) offer and potentially gaining an advantage in a race to build 5G networks.

The $184 per share all-stock offer represents a discount of 17.8 percent to Straight Path’s close on Wednesday and an equity value of $2.3 billion. The stock had skyrocketed nearly five-fold since April 7, a day before ATT made the first move with a $95.63 per share offer.

The Verizon deal, however, disappointed some investors – Straight Path’s shares slumped 20 percent to $178 in premarket trading on Thursday.

The acquisition of Straight Path, which holds a large trove of 28 GHz and 39 GHz millimeter wave spectrum used in mobile communications, is expected to give Verizon a head start as wireless carriers race to set up fifth-generation (5G) networks.

5G networks are expected to offer faster downloads and boost internet-reliant products such as self-driving cars.

The frenzy around Straight Path started after an anonymous short-seller tipped off regulators in November 2015 that the company hadn’t built communications systems as it had claimed, leading to an investigation by the U.S. Federal Communication Commission.

The company settled with the FCC and put itself on the block in January. ATT swooped in with its offer in April, valuing Straight Path about three times its then market capitalization.

Straight Path agreed to be bought by ATT, but an “unnamed telecommunications company”, which Reuters reported was Verizon, came up with a far bigger offer.

Straight Path said on Thursday Verizon will pay, on behalf of Straight Path, a termination fee of $38 million to ATT.

Evercore was financial adviser to Straight Path and Weil, Gotshal Manges served as company counsel on the deal.

Debevoise Plimpton LLP served as counsel to Verizon.

(Reporting by Rishika Sadam in Bengaluru; Editing by Saumyadeb Chakrabarty)

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