Verizon set for historic Vodafone deal

Written by Reuters | London | Updated: Sep 3 2013, 09:24am hrs
Verizon Communications was poised on Monday to take full control of its US wireless business with a $130 billion deal to buy out Vodafone and end a decade-long corporate stand-off.

The British firm said late on Sunday it was in advanced talks with Verizon to sell its 45% 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 told Reuters they expected a full announcement after the London stock market closes on Monday, and after the board of Verizon meets to vote on the proposed transaction for the biggest mobile operator in the US.

The Vodafone board has voted in principle to back the deal, one person familiar with the situation said.

The move to sell Verizon closes a heady expansionist chapter for Vodafone, one of Britain's best-known companies, which grew rapidly over the last 20 years through a spate of aggressive deals, taking its brand into more than 30 countries across Europe, Africa and India.

The world's largest deal, a $203 billion hostile takeover of Germany's Mannesmann in 2000, made Vodafone the company it is today.

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

Speculation has already begun that the 31-year-old company could itself become a bid target, and news of the pending deal sent its shares up 4% to a more than 12-year high in London trade on Monday.

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

To fund the cash portion of the deal, Verizon has lined up as much as $65 billion in financing from four banks: JPMorgan Chase, Morgan Stanley, Barclays and Bank of America Merrill Lynch, they said. The banks have committed to the financing, which is expected to be split evenly among the four, two persons said.

The news that a final agreement is near follows years of speculation as to when and whether Vodafone, the world's second largest mobile operator, would exit the highly successful business.

Vodafone entered the US in 1999 through a series of deals that resulted in the formation of Verizon Wireless in 2000, with Verizon Communications holding 55% of the company and Vodafone the rest.

But the two sides clashed almost immediately and the partnership has over the years been fraught with difficulties, with both partners at times seeking to buy out the other.

Verizon at one point withheld dividends from Vodafone for six years in a bid to force the British group out. Those efforts were resisted by Arun Sarin, who led the company from 2003 to 2008, and then by current boss Vittorio Colao.

Their resistance, often in the face of investor demands for a sale, may prove to have been a masterstroke. Verizon Wireless became the largest operator in the US, a growing market that boasts higher margins and prices than in Europe.

Since it resumed paying dividends, Vodafone has received 7.4 billion pounds ($11.5 billion) from the US business, helping it to return 23 billion pounds in total to shareholders in the last three years and making it a must-have stock for funds and pension groups around the world.