Bidding war raises the ante for small firm to $3.1 billion

A small Virginia company will get a big payday because of competition among telecoms wanting to upgrade their wireless services.

On May 11, Verizon Communications signed an agreement to acquire Glen Allen-based Straight Path for $3.1 billion, $184 per share, in an all-stock transaction that ended a fierce bidding war with AT&T.

Straight Path, which has nine employees, holds an extensive portfolio of 39 GHz and 28 GHz wireless spectrum licenses. Those licenses are expected to be highly important in moving wireless telephones to the next generation of service, 5G.

“Verizon has announced 11 new markets to launch 5G in. They will use the spectrum they just bought [from Straight Path] to provide last mile solution,” says Jennifer M. Fritzsche, an analyst with Wells Fargo Securities in Chicago.  

Only a month before the final Verizon offer, Straight Path had signed a $1.6 billion, $95.63 per share, merger agreement with AT&T.

Fifteen days later, Straight Path received an unsolicited bid from Verizon, offering $104.64 per share. The telecom giant raised the ante twice more before eventually ending at $184 per share. AT&T bowed out of the bidding.

As part of the deal, Verizon will pay AT&T a termination fee of $38 million. Straight Path determined the Verizon transaction constituted a “superior proposal” to the merger agreement with AT&T.

Verizon also will pay $85 million in fines and 20 percent of the sale proceeds to the Federal Communications Commission. In January, Straight Path had agreed to pay the penalty for its failure to deploy wireless services as required under spectrum licenses.

The Verizon deal also gives Straight Path’s majority owner, New Jersey-based telecom investor Howard Jonas, a hefty payout for the small company run by his son, Davidi.

According to The Wall Street Journal, Howard Jonas founded long-distance provider IDT Corp. in 1990, which started Net2Phone, an internet-calling company, six years later. Jonas sold his stake in Net2Phone to AT&T for $1.1 billion in 2000.

Jonas paid $56 million in 2001 and 2002 in buying U.S. airwave licenses and other assets of Winstar Communications Inc. He spun off Straight Path in 2013.