Is Warren Buffett Eyeing This Telecom Merger With Berkshire's $334 Billion Cash Pile?

An interesting possibility is based on Verizon's (NYSE: VZ) plan to buy Frontier Communications Parent (NASDAQ: FYBR) for $20 billion. An expert, who is often known for his approach to holding onto stocks for the long term, Buffett has had a previous interest in merger arbitrage, having participated in such transactions fairly frequently in the past.

For instance, Buffett employed this strategy in the case of Monsanto Company when it was being acquired by Bayer AG in 2017-2018, IBM in its acquisition of Red Hat in 2018-2019 and Microsoft in its acquisition of Activision Blizzard in 2022. All the examples were all-cash transactions and were able to be completed despite regulatory risks. They also realized healthy short-term spreads because of market uncertainties.

As for the issues that investors may have with Verizon's financial position, having a net debt of $143 billion, it is important to note that Verizon has plenty of liquidity. The company has a market cap of $180 billion and $12 billion of available revolving credit facilities, which places it in a good position to fund the Frontier deal.

On September 3, 2024, Verizon Communications agreed to buy Frontier Communications Corp for about $20 billion, or $38.50 per share. Both the companies’ management expects 18 months to receive the shareholder and regulatory approval to create a potential arbitrage window that could be interesting to Buffett and Berkshire Hathaway.