AT&T earlier this month announced plans to scoop up millimeter wave spectrum company Straight Path Communications for $1.6 billion, but it seems the transaction may not be a done deal after all.
Just after the deal was announced, rumors began to swirl that AT&T may have some competition. Those reports have now been confirmed by Straight Path itself, which on Tuesday announced its Board of Directors had received a “superior proposal” from an unnamed party. According to Reuters’ report, though, that anonymous bidder – referenced by Straight Path only as a “multi-national telecommunications company” – is Verizon.
The new bid comes in at a total of $1.8 billion, offering $104.64 per share in an all-stock deal, compared to AT&T’s offer of $95.63 per share. The higher bid is valid until 11:59 p.m. ET on May 3.
Wells Fargo Senior Analyst Jennifer Fritzsche called the announcement a “very interesting development,” and noted the firm believes such high band spectrum is “more valuable to those players who own a wired network, as it is our understanding that in order for this spectrum to work effectively, it has to be attached to a densely fiber-fed base station.” this being the case, she said, it’s “fair to assume” Straight Path’s holdings would pair well with Verizon’s plans given the company’s recent XO and Corning deals for fiber.
Straight Path shares were up nearly 11 percent Tuesday morning on the news.
According to Straight Path, the ball is now in AT&T’s court. Per its agreement with Straight Path, the carrier has five business days to negotiate a better deal.
If AT&T doesn’t do that and Straight Path jumps ship in favor of the higher bid, the company will be required to pay AT&T a $38 million termination fee. But Straight Path said its mystery bidder has agreed to pay that fee, though Straight Path would be obliged to repay that amount “under certain circumstances in connection with a termination of the Bidder’s merger agreement.”
For now, Straight Path indicated it remains subject to its merger agreement with AT&T and noted the company’s board has not changed its recommendation in support of the AT&T transaction, the existing AT&T Merger Agreement, or its recommendation that Straight Path’s stockholders adopt the AT&T Merger Agreement. The company said there can be no assurances that a transaction with the anonymous bidder will result from the new offer, or that any other transaction will be consummated.
More background on Straight Path’s need to offload its trove of 28 GHz and 39 GHz spectrum licenses in the wake of an FCC settlement can be found here.