_{DEAL OF THE MONTH}

Verizon Looks to New Frontiers

Exploring new frontiers has always been part of the human journey, long before Columbus set sail in 1492. Now, with Verizon’s $20 billion acquisition of Frontier Communications, space might just be the final frontier left to conquer.

While the nitty-gritty of the telecom industry may be difficult to understand some of the synergies are quite simple. Frontier and Verizon together offer a network that cover 25 million fiber routes across 31 different states (including DC).

$20 billion is nothing to sneeze at, so lets dive into the transaction terms. The deal is all-cash, valuing Frontier at $38.50 per share, which represents a 37% premium to Frontier’s unaffected share price. As we know, investors always price in some deal risk, so it makes sense that Frontier has not traded up to the $38.50 / share yet.

Verizon intends to maintain its dividend and deleveraging strategy despite the acquisition, but it will see an increase in net unsecured leverage to 0.3x (which is still remarkably low).

Furthermore, Verizon expects the acquisition to be EPS accretive beginning in 2027 and EBITDA accretive on day one, partially driven by the $500 million of run-rate cost synergies anticipated by 2027.

Despite the increase in leverage, it appears that Verizon shareholders are net positive on the transaction, and Verizon has continued to trade up this year (15.5% YTD).

The deal is expected to close in 18 months following positive approval from Frontier’s board, but it is likely that will not be a hurdle given the significant premium paid here.

As a loyal Fios customer, I hope that Verizon juices my internet speeds as a result of me giving them Deal of the Month. 🥸

_{PRESENTED BY SYNAPTIC}

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_{STRATEGIC DEAL OF THE MONTH}

LVMH Climbs Higher with Investment in Moncler

With a long cold winter fast approaching, everyone is preparing in their own way. French luxury brand LVMH has decided that the easiest way to prepare for winter is to own all of the coats.

Moncler - maker of the only jackets more expensive than Canada Goose - has been under pressure this year, with share price down more than 10% prior to the investment by LVMH.

News of LVMH’s investment has reversed the stock’s losses this year, leaving them up 3.8% since the start of 2024.

Interestingly, LVMH's investment in Moncler isn't a direct one. Instead, it’s in Double R, the holding company controlled by Moncler’s CEO. LVMH acquired a 10% stake in Double R, which holds a 15.8% stake in Moncler. For those less mathematically inclined, this means LVMH’s indirect ownership in Moncler is only around 1.6%.

LVMH has the option to grow the stake in LVMH to ~4% over the next 18 months, which has sparked rumors amongst analysts that LVMH may be looking for a takeover of Moncler in the next year.

Despite its history of consolidation in the luxury sector, LVMH has also shown that it is capable of being a passive shareholder. It currently hods a 10% stake in Italian group Tod’s, which it has held since 2021, despite never acquiring more equity.

On the back of the news, LVMH has also traded up after suffering through a difficult year so far. It still remains down ~1.2% to-date.

The acquisition announcement and recent price surge has resulted in a $30bn net worth swing for Bernard Arnault - founder of LVMH - overtaking Zuck as the world’s third richest person.

The deal dynamics for this one are pretty interesting, so we are going to take a quick look at why LVMH would bother acquiring such a small stake in a company.

1. Luxury sector performance has been weak, so if you have a war chest, now is the time to buy.

2. Even though now may be a good time to buy, there is a significant lack of large and on-the-market M&A targets in the space.

3. France is considering imposing taxes on share buybacks, which would significantly limit their attractiveness.

When you put those three things together, there are limited good alternatives from a corporate finance perspective to use the excess cash for. The alternatives really are to pay dividends or acquire companies.

Given how poorly Moncler has traded over the past year, it makes sense that putting an investment into this company represents an attractive way to generate a strong return on investment for LVMH if Moncler’s fortunes improve or another buyer steps in.

_{INT’L DEAL OF THE MONTH}

Egypt Represents a Golden Opportunity for AngloGold Ashanti

I’m a fan of food and rocks, so here’s this month’s rock deal (and no, I’m not orchestrating these for content!).

AngloGold Ashanti has agreed to acquire Egypt-focused Centamin minerals in a $2.5 billion stock and cash deal, which represents a 36.7% premium to Centamin’s unaffected share price.

Similar to our Verizon / Frontier deal, some synergies are pretty easy to understand in the rock deals. The easiest one to understand is things being close together usually helps. Centamin’s main project is Sukari, which fits within AngloGold’s existing Africa footprint.

The key terms of the deal include 0.06983 new AngloGold Ashanti shares and $0.125 per share in cash, which implies a total enterprise value of $2.5 billion for Centamin. As we cover with all of these deals, AngloGold Ashanti has assured investors that it will maintain its dividend policy after the acquisition.

There are significant synergies expected across these assets, including being accretive to FCF per share after the first year and adding long-life assets to the portfolio, ensuring long-term value for AngloGold Ashanti shareholders.

AngloGold has had an absolutely incredible year share price wise, up ~52% YTD, but that is partially driven by the fact that gold prices have reached all-time highs of $2,675/ounce (up ~30% YTD).

Both groups of investors appear optimistic about the deal. Centamin share price ripped towards the offer value of 163 pence almost immediately after announcement.

Mining is a hard business, but this has been a great year for mining announcements. While I can't predict how African nations will view this from an antitrust perspective, the focus is usually on continued regional investment, and AngloGold is dedicated to expanding its presence there.

_{NEWS ROUNDUP}

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