Topic: Growth Stocks

The Wall Street Stock Forecaster Hotline – Friday, May 15, 2009

Article Excerpt

VERIZON COMMUNICATIONS INC., $29.61, New York symbol VZ, plans to merge parts of its local-phone operations in 14 states with those of Frontier Communications Corp. (New York symbol FTR). As a result, Verizon shareholders will get one Frontier share for roughly every 4.2 Verizon shares. The company will finalize the exact exchange ratio just prior to the merger. This is a tax-deferred distribution, so investors will only be liable for capital-gains taxes on their new Frontier shares when they sell them. Verizon shareholders will control 68% of the new company. Verizon itself will get $3.3 billion in cash and debt securities. It will probably use the cash to pay down its $55.7-billion long-term debt, which is equal to 66% of its market cap. The assets that Verizon will spin off mainly consist of 4.8 million land lines in rural areas. As of March 31, Verizon had 35.2 million land lines in 25 states. The deal, which will probably close sometime next…