[cnxvideo id=”655426″ placement=”ros”]Most investors likely have not heard of a company called Straight Path Communications Inc. (NYSEMKT: STRP). This company is one of the largest holders of 28 GHz and 39 GHz millimeter wave spectrum, and now it is getting a 200% premium acquisition by AT&T Inc. (NYSE: T).
The two companies have signed a definitive merger agreement in an all-stock transaction of AT&T stock that valued Straight Path Communications at $95.63 per share. The merger, as an all-stock transaction, is also listed as a tax-free reorganization, whereby Straight Path holders can become AT&T shareholders.
This merger has been approved by the board of directors of both companies. Straight Path’s board had previously announced a strategic alternatives process to maximize shareholder value, and the deal officially ends that process.
This aims to place AT&T in a better spectrum position to compete against Verizon and Sprint. Straight Path’s spectrum map (see below) also covers most of the country when you count its state and various spectrum.
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It is not usual to see companies pay a 200% premium in an equity deal value of $1.25 billion. The transaction value is said to have a total value of $1.6 billion, if you include the liabilities and amounts to be paid to the FCC per the terms of Straight Path’s January 2017 consent decree. The actual terms stated:
Stock consideration received by Straight Path shareholders will be based on a variable number of AT&T common stock issued at transaction close to ensure fixed consideration of $95.63 per share. The companies anticipate a closing within 12 months, subject to FCC review. The transaction is supported by Straight Path’s majority shareholder, Howard Jonas, who has entered into a voting agreement with AT&T and agreed to vote his Class A shares (held through a trust) in support of the transaction, subject to certain limitations.
Straight Path became an independent public company back in 2013, with an initial price per share of $6.40.
A coverage map of Straight Path’s spectrum has been provided below.
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