Frontier Communications announced a definitive agreement with Verizon Communications under which Frontier will acquire Verizon’s wireline operations that provide services to residential, commercial and wholesale customers in California, Florida and Texas, for $10.54 billion in cash. These Verizon properties include 3.7 million voice connections, 2.2 million broadband connections, and 1.2 million FiOS® video connections. The network being acquired is the product of substantial capital investments by Verizon and is 54% FiOS enabled. Subject to regulatory approval, the transaction is expected to close in the first half of 2016.

Frontier will finance this acquisition with the issuance of a combination of equity and equity-linked securities, as well as debt. According to a related Bloomberg article, JPMorgan Chase will serve as the lead arranger on the debt offering to be used to finance the acquisition, with Citigroup and Bank of America acting as co-leads on the transaction.

“This transaction marks a natural evolution for our company and leverages our proven skills and established track record from previous integrations,” said Maggie Wilderotter, Frontier Communications chairman and chief executive officer. “These properties are a great fit for Frontier and will strengthen our presence in competitive suburban markets and accelerate our recent market share gains. We look forward to realizing the benefits this transaction will bring to our shareholders, customers and employees.”

The Verizon wireline operations being acquired by Frontier generated revenue of more than $5.7 billion in 2014. As a result of certain Verizon-allocated overhead costs not transferring to Frontier, or being replaced by Frontier’s lower cost structure, Frontier expects costs to be reduced by $525 million in the first year after close and $700 million by year three. Frontier expects the transaction to be 35 percent accretive to free cash flow per share in year one and to improve Frontier’s strong dividend payout ratio by 13 percentage points.

To read the entire press release, click here.

To a related Bloomberg article, click here.