Following a monthlong bidding war for wireless spectrum holder Straight Path Communications, Verizon has come out on top. The telecom giant will buy Straight Path for $3.1 billion in an all-stock transaction, beating rival AT&T's offer of $1.6 billion.
The new deal represents a massive 404 percent premium to Straight Path's closing stock price of $36.48 on April 7, one business day prior to Straight Path's entry into a merger agreement with AT&T.
Verizon's Straight Path win will give the carrier valuable --and hard to come by -- millimeter wave (mmWave) spectrum licenses that cover the entire U.S., including within the top 40 markets. The wireless spectrum will give Verizon an advantage when building out 5G networks, solution providers say.
"Wireless spectrum is more valuable than gold right now because so many companies want to buy it," said Rickie Richey, CEO of Fairhope, Ala.-based Altaworx, an AT&T and Verizon partner that focuses on wireless solutions.
AT&T had said in April that it would acquire Straight Path for $95.63 per share, or $1.6 billion. Later in the month, an unnamed bidder came forward with an offer of $104.64 per share or $1.8 billion. The unnamed bidder, which industry analysts and channel partners predicted was Verizon, in May submitted a second bid of $184 per share or $3.1 billion, nearly doubling AT&T's offer.
The bidding war demonstrated how hungry wireless providers are for wireless spectrum as they race to build next-generation networks, according to Rob Chamberlin, co-founder and chief revenue officer of DataXoom, a Walnut Creek, Calif.-based wireless solution provider that partners with both AT&T and Verizon.
"The market significantly undervalued Straight Path's assets," Chamberlin said.
Verizon did not respond to CRN's request for comment on the acquisition prior to publication time.
Straight Path said that its board of directors determined, after consulting with its financial advisers and outside legal advisers, that Verizon submitted a "superior proposal" to the AT&T merger agreement. The Glen Allen, Va.-based company said that AT&T chose not to make any new bids or amendments to its original merger agreement.
Now that Straight Path has taken Verizon up on its offer, the company owes AT&T a $38 million termination fee, which Straight Path said Verizon will be paying on its behalf.
Straight Path's stock has been soaring since AT&T announced its acquisition agreement in April, kicking off the start of the bidding war. However, the company's stock took a nose dive Thursday morning following news of the new deal with Verizon, falling 20.47 percent to $177.97 per share.