Verizon poised for historic US$130bn Vodafone deal

Reuters, LONDON

Tue, Sep 03, 2013 - Page 15

Verizon Communications was poised yesterday to finally take full control of its US wireless business with a US$130 billion deal that would buy out Vodafone and bring an end to a decade-long corporate standoff.

The British firm said late on Sunday that it was in advanced talks with Verizon to sell its 45 percent stake in the Verizon Wireless joint venture for cash and common shares in what would be the world’s third-largest deal of all time.

People familiar with the situation said they expected a full announcement to come after the London stock market closed yesterday, and after the board of Verizon met earlier yesterday to vote on the proposed transaction.

The move to sell the jewel in Vodafone’s crown closes a heady expansionist chapter for one of Britain’s most famous companies, which grew rapidly over the last 20 years through a spate of aggressive deals to operate in more than 30 countries across Europe, Africa and India.

The new Vodafone will be smaller, less profitable and more reliant on its core, mature European assets, but it is expected to use the huge windfall to rebuild via smaller acquisitions and higher network investments.

Speculation has already begun that Vodafone could itself become a bid target, and news of the pending deal sent its shares up 4 percent to a more than 12 year high in early London trade yesterday.

Under the terms of the proposed agreement, Vodafone would get US$60 billion in cash, US$60 billion in Verizon stock, and an additional US$10 billion from smaller transactions that will take the total deal value to US$130 billion, two of the people familiar with the matter said on Saturday.

To fund the cash portion of the deal, Verizon has lined up as much as US$65 billion in financing from four banks: JPMorgan Chase & Co, Morgan Stanley, Barclays PLC and Bank of America Merrill Lynch, they said.

The banks have committed to the financing which is expected be split evenly among the four, two people said.

If the deal is concluded, it will end one of the longest-running corporate standoffs, which has at times seen both partners seek to buy out the other in times of weakness.

For Verizon, it means that it no longer has to share the billions in cash generated by Verizon Wireless.

On the Vodafone side, chief executive Vittorio Colao will get a war chest of cash to reward shareholders and potentially carry out acquisitions to strengthen the group’s European and emerging market operations.