Verizon Communications Inc. should announce an agreement as soon as today to acquire Vodafone Group’s 45% stake in their wireless venture for $130 billion, capping its 10 years-long pursuit of full control of the biggest U.S. mobile phone company.
The $130 billion price will be paid in a combination of cash and Verizon stock, according to a statement from Vodafone on Sunday, which described the talks with Verizon as “advanced.” An agreement on the deal has been reached, and Verizon’s board will vote on the terms today, said a person familiar with the matter, who asked not to be identified because the details haven’t been made public. The acquisition will be structured almost equally between cash and shares and will include Verizon exiting its 23% stake in Vodafone Italia, according to two people with knowledge of the transaction. JP Morgan Chase & Co., Bank of America Corp., Barclays Plc, and Morgan Stanley are leading financing of just over $60 billion in equal proportions.
Verizon, which owns 55% stake of Verizon Wireless and is led by Chief Executive Officer Lowell McAdam, has control over whether and when the unit pays its owners dividends. That leaves Vodafone, run by CEO Vittorio Colao, dependent on it for an important source of cash. The stake in Verizon Wireless, with its industry-leading profits, has been a bright spot for Vodafone, which has lost about half of its market value since 2000, the year Verizon Wireless began service.
A centerpiece of the deal will be a substantial return of capital to Vodafone shareholders in a mix of stock and cash estimated in the tens of billions. As the telecoms group is one of the most widely held stocks in the UK, it would help the British economic recovery in what has been labelled a “massive quantitative easing injection”.
Bankers serving the deal for Verizon, include JPMorgan, Morgan Stanley, Bank of America Merrill Lynch and Barclays. The bankers are set to underwrite just over $60 billion in debt financing to fund the deal, people close to the talks said. Guggenheim Partners, a long-time adviser to Verizon, is also involved along side Paul Taubman, the former co-head of the securities division of Morgan Stanley who left the bank last year. Goldman Sachs and UBS are advising Vodafone.
Bankers and investors say this would be the world’s biggest investment-grade debt deal but it would not be a challenge.
Vodafone jumped 4.3% while Verizon slumped almost 1% on Friday.