Vodafone Confirms ‘Advanced’ Verizon Talks On £84bn Buyout

Vodafone and Verizon are today expected to confirm a $130bn (£84bn) deal which would see Verizon buy Vodafone’s 45 percent stake in Verizon Wireless, taking full control of the US’ largest mobile operator.

The deal would be the third largest of all time, after Vodafone’s acquisition of Mannesmann for $203bn in 2000 and Time Warner’s acquisition by AOL for $182bn in 2001.

‘Advanced’ discussions

Following speculation around the deal last week, Vodafone on Sunday night issued a brief statement confirming that discussions with Verizon were “advanced”.

Vodafone’s stake in Verizon Wireless stems from the $61bn acquisition in 1999 of a US company called AirTouch, whose mobile business was later merged with that of Bell Atlantic. That deal itself was part of a 20-year period of massive expansion which saw Vodafone carry out aggressive buyouts across Europe, Africa and India.

The sale will see Vodafone reduced in size and profitability, but gaining a cash injection that it is expected to use toward smaller acquisitions and network investments. Industry observers have said the company’s coming acquisition activity is likely to focus on building its bundled mobile, broadband, fixed telephony and television services in Europe and in emerging markets.

Since Vodafone is one of the most widely held shares in the UK, the deal, if finalised, would also result in tens of billions of pounds being paid to British shareholders, aiding the British economic recovery, according to analysts.

After agreeing in principle to the deal, Vodafone’s board met on Sunday to give final approval to the deal, and Verizon’s board is meeting on Monday to do the same, according to multiple reports.

Cash injection

In the absence of last-minute hitches the companies are expected to reveal the terms of the deal in separate statements after the close of markets in London on Monday. Those details include how much cash will be paid to investors and how much will be retained by the company.

Verizon’s bankers, including JPMorgan, Morgan Stanley, Bank of America Merrill Lynch and Barclays, are to underwrite more than $60bn in debt financing, sourced from the bond market and loans, according to reports. This would be the world’s biggest investment-grade debt deal, but Barclays said in a note that raising it would be “feasible”.

Vodafone has reportedly structured the deal in such a way that it will face a tax bill of only about $5bn, since it involves selling a stake in a US domestic asset to a domestic buyer. Controversially, the deal is likely to result in no UK tax.

Vodafone’s discussions with Verizon go back at least to 2004, when Vodafone bid for AT&T’s wireless business, a deal that would have required it to sell its stake in Verizon Wireless for antitrust reasons.

In April it was rumoured that Verizon might even seek to acquire Vodafone, which sent the UK company’s shares tumbling at the time.

Other recent telecoms acquisitions include the buyout of No. 3 US wireless carrier Sprint Nextel by Japan’s Softbank for $21.6bn.

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