Verizon Reaches Agreement to Acquire Vodafone's 45 Percent Interest in Verizon Wireless for $130 Billion

By Adam Zeis on 2 Sep 2013 01:08 pm EDT
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Verizon has announced today that they have entered into an agreement with Vodafone to acquire Vodafone's 45 percent stake in the company for $130 billion. The deal will give Verizon back 100 percent ownership and the deal is expected to close by the end of Q1 2014. Verizon will pay Vodafone $58.9 billion in cash and will also distribute stock to Vodafone shareholders to make up most of the remaining balance of the deal. 

Verizon will hold a conference call tomorrow, September 3rd at 8am ET to discuss further details of the transaction. 

Press Release

NEW YORK – Verizon Communications Inc. (NYSE, Nasdaq: VZ) today announced that it has entered into a definitive agreement with Vodafone Group Plc (London, Nasdaq: VOD) to acquire Vodafone’s U.S. group with the principal asset of 45 percent of Verizon Wireless for $130 billion, consisting primarily of cash and stock. Verizon expects the transaction at close to be immediately accretive to the company’s EPS (earnings per share) by approximately 10 percent, without any one-time adjustments.

The transaction was unanimously approved by the boards of directors of Verizon and Vodafone, and is subject to customary closing conditions, including regulatory approvals and the approval of both companies’ shareholders. The transaction is expected to close in the first quarter of 2014.

The transaction would provide Verizon with 100 percent ownership of the industry-leading wireless carrier in the United States. As a wholly owned entity, Verizon Wireless will be better equipped to take advantage of the changing competitive dynamics in the market and capitalize on the continuing evolution of consumer demand for wireless, video and broadband services.

Lowell McAdam, Verizon chairman and CEO, said: “Over the past 13 years, Verizon Wireless has been a key driver of our business strategy, and through our partnership with Vodafone, we have made Verizon Wireless into the premier wireless provider in the U.S. The capabilities to wirelessly stream video and broadband in 4G LTE complement our other assets in fiber, global IP and cloud. These assets position us for the rapidly increasing customer demand for video, machine to machine and big data. We are confident of further growth in wireless, and our business in its entirety.”

McAdam continued: “This transaction will enhance value across platforms and allow Verizon to operate more efficiently, so we can continue to focus on producing more seamless and integrated products and solutions for our customers. We believe full ownership will provide increased opportunities in the enterprise and consumer wireline markets.”

McAdam concluded: “Verizon Wireless is the greatest wireless company in the world, and a big part of this success was due to the hard work of both partners, Vodafone and Verizon. The timing was right to execute a transaction that benefits both companies and their shareholders. Today’s announcement is a major milestone for Verizon, and we look forward to having full ownership of the industry leader in network performance, profitability and cash flow.”

Vittorio Colao, Vodafone Group CEO, said: “This transaction allows both Vodafone and Verizon to execute on their long-term strategic objectives. Our two companies have had a long and successful partnership and have grown Verizon Wireless into a market leader with great momentum. We wish Lowell and the Verizon team continuing success over the years ahead.”

Quarterly Dividend Increase

Demonstrating the importance of its dividend policy to deliver value for shareholders, Verizon also announced today that its Board of Directors has declared a quarterly dividend of 53 cents per outstanding share, an increase of 1.5 cents per share, or 2.9 percent, from the previous quarter. On an annual basis, this increases Verizon’s dividend 6 cents per share, from $2.06 to $2.12 per share.

Financing and Approvals

The transaction consideration of $130 billion consists of a combination of cash, Verizon common stock and other items.

Verizon will pay Vodafone $58.9 billion in cash. To fund this portion of the consideration, Verizon has entered into a fully executed $61.0 billion Bridge Credit Agreement with J.P. Morgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc., Bank of America, N.A. and Barclays. Verizon intends to reduce the commitments under the Bridge Credit Agreement with the issuance of permanent financing. In addition, Verizon expects to maintain capital structure, balance sheet and financial policies consistent with investment-grade credit metrics, in part based on 100 percent access to Verizon Wireless’ cash flow.

Verizon will also issue common stock currently valued at approximately $60.2 billion to be distributed to Vodafone shareholders, subject to a collar arrangement with a floor price of $47.00 and a cap price of $51.00 that will determine the maximum and minimum number of shares to be issued upon closing of the transaction. In addition, Verizon will issue $5.0 billion in notes payable to Vodafone, and Verizon will sell its 23.1 percent minority stake in Vodafone Omnitel N.V. to Vodafone for $3.5 billion. The remaining $2.5 billion of the transaction value will be a combination of other consideration.

Guggenheim Securities, LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Paul J. Taubman served as lead financial advisors to Verizon, and J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC also rendered fairness opinions in connection with the transaction. Barclays and BofA Merrill Lynch served as financial advisors to Verizon. Wachtell, Lipton, Rosen & Katz and Macfarlanes LLP are serving as transaction counsel to Verizon, and Debevoise & Plimpton LLP is advising Verizon on its debt financing.

Conference Call

Verizon executives will hold a conference call for investors and analysts to discuss further details of this transaction at 8 a.m. Eastern time tomorrow, September 3. There will also be a live webcast of the call on Verizon’s Investor Relations website, www.verizon.com/investor, where presentation materials will be posted. Dial-in numbers are 888-455-3018 for domestic callers, and 773-799-3816 for international callers; the passcode is "VERIZON."

A replay of the webcast will be available within two hours after the call. The webcast will be accessible on Verizon’s Investor Relations Web site, www.verizon.com/investor.

 

Topics: Verizon Carriers

Reader comments

Verizon Reaches Agreement to Acquire Vodafone's 45 Percent Interest in Verizon Wireless for $130 Billion

61 Comments

If you're dealing with $130 billion something like Blackberry would be a liability and not an asset, thats considering they even know Blackberry exists.

Not likely. But regaining interest/equity from large outside entities from other markets can often help an organization better serve their home market. I think this is a great move for VZW.

Posted via CB10

I wonder if they will still use Vodafone for overseas roaming.

~STV on Z10STL100-3/10.1.0.2025 TMO US

Friend of mine is with Verizon and has had 3 Z10 in 4 months. All quit working, long time BlackBerry owner, now thinking of moving on. Is it Verizon bloatware or BlackBerry causing the phone problems.

Posted via CB10

Oy this post... Verizon installs two apps on your device and both are easy to remove. It's nothing like the bloatware of the old days.

I'm happy with the best service and thanks to the leak team I have the best OS versions.

Sent via Z10 on Verizon running a .1047 hybrid thru CB10

Definitely true. Verizon is number 1. Most people that hate Verizon simply can't afford the services. Verizon is expensive but 100% worth it.
I've been through a few Z10's as well but that's mainly release bugs. Any problems I have now are from installing leaks and android apps/ games

Posted Via My Most Used BlackBerry App

Its like people who put down iPad, they can't afford it. iPad is the best just like Verizon. The best is always expensive.

I'm not surprised by the price, as Verizon had previously made a $100 billion dollar offer for that stake and Vodaphone rejected it.

So that's why Verizon feels like a sleepy giant here in the US. Let's see how it revives in the next two years

Marketing is everything

That's a lot of dough to throw around. Bankers are raking it in on that transaction.

CB10- BlackBerry Z10 - 10.2.0.1047

big boys playing bigger games of nearly 130 usd , wising to see blackberry back in glorious past of net worth nearing 80 billion usd

now our vodaphone buddies on the other side of the pond will feel our pain for lack of updates.. misery does love company.. haha..

I see some rate increases and what is left of the perks going bye bye. Having to borrow half the money to get the deal done.

Party time for Vodafone sharehalders.

Verizon customers are going to be paying for that $130 Billion for a long time

Verizon: we'll buy back your share for 100 million.
Vodafone: Nope. 130 million.
Verizon: We'll leak the deal to the press! 100 million!
Vodafone: F*** you, pay me. 130 million ducats.
Verizon: ......k.

I wish canadian companies could have at least bid on this. It's like an auction and you are the only one there.

Posted via CB10

There is no way that a Canadian company could approach that offer. Verizon was part owner to begin with.

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Judging by your comment I don't think you caught the gist of the story. This wasn't any sort of deal another company could bid on. Verizon was part owned by Vodafone and they just bought that stake back. It's a strategic move for them so they can respond to market changes faster.

Posted via CB10

Bottom line Verizon doesn't want to depend on Vodaphone. They want to be 100% self contained. That's the goal of any company.

This is going to bone the wireless landscape in Canada. Verizon may not want to spend more money to buy spectrum after approving this deal.

Posted via CB10

Like they're going to get into Canada with all the opposition from the Canadian carriers and the support the carriers are accumulating from the Canadian population.

Posted via CB10

They won't bother going to Canada. The US is based on Capitalism and Canada is based on Socialism. Its 2 completely different government idioms and companies like Verizon and Vodaphone wouldn't be interested in Canada. It's like a rich parent moving in with their college student kid. Not gonna happen.

You know Canada boasts the stronger capitalist economy, right?

With all the subsidies for dairy, corn, and meat in thé US, you're more socialist than we are.

Posted via CB10

Good, we don't want companies the size of Verizon coming into the Canadian Wireless industry and having the ability to bid on spectrum, through rules and regulations designed for small subsidiaries or startups.

There is nothing showing that if they are allowed entry into the Canadian wireless industry under today's rules, that they'll provide any value add to the consumer by driving wireless prices down. They could come in and simply price there product and services to what the Canadian market will bear.

From my Z10 to YOU, BOO-YAH!

And with even prices, Verizon would offer new services (e.g., no North America roaming) or cheaper handsets with their purchasing power.

Did you not see how the big three responded to two year deals ? They hikes monthly rates and boned customers who want data. Ridiculous.

Having Verizon buy spectrum only serves to help the industry which is still an infant and going through the "terrible twos".

Posted via CB10

I was watching a video of this on the Appy Geek app I have. Its the second largest business deal in US history. The deal is worth about 50x more then Blackberrys full value. These sort of nubers make you realize just how big the tablet and smartphone industry is. Lot of zeros.

The no. 1 biggest was the merger of AOL and Time Warner, and that worked out great ;). Thankfully Big Red can't raise my rates for another 18 months. They don't really need more spectrum since while ATT was spending all that money to get the iPhone, Verizon was spending on infrastructure. My service is incredible with Verizon.

BlackBerry Z10 | Verizon | 10.2.0.1371

Hey fellow Verizon user. Ya I think the merger of AOL and Time Warner was ballparked around $150 billion and that was over 13 years ago before 9/11. The economy has really changed since then so I can only imagine what that merger would be worth today. I agree 100% with infrastructure being paramount and there's no doubt Verizon has the best coverage. My wife is really happy with her 4g iPad mini on Verizon. AT&T's coverage is only marginal compared to Verizon. I was going to buy a Playbook 4g but when Heins killed my Playbook wifi that was sort of the end for me.

Canada's business community is complacent and not interested in major competition like the US. Its embedded into the Canadian Socialist mentality. The first time I visited Canada I was shocked at how neutral the business community there was. There's no competition there at all, and the sad thing is most Canadians are oblivious to this.

No offence meant and sorry the truth strikes you as ''ignorant'' but if you ask any New Yorker they'll pretty much tell you the same I said.

You US are just the more capitalist, but Canada is surely not socialist!!!
Or socialism would have desappear long ago!!

Again, you know nothing, Jon Snow.

We have a strong economy, and outside of the wireless industry, competition is robust and lively.

Posted via CB10

I'd hardly call myself a journalist like Jon Snow Mr. Canuck, but ''robust and lively'' vs insanely competitive are two very different things just as capitalism and socialism are.

I guess you don't really know what socialism is?
But fair enough, in a country where just yesterday communists people were hunted hard...
I guess even 2% of socialism can make yu US scary and hide on your bunkers ;)

LOL ok my Canuck friend, we'll have to ''agree to disagree'' and no hard feelings :-)

''Big Brother'' is watching us all from NYC.

I guess swallowing that big cash outlay puts the kibosh on any plans to become Canada's 4th major wireless network provider.

Posted via CB10

And we all thought BB having 3 billion was a crap load lol. VZW had revenues of 113 Billion for Q 4 2011 thru Q3 2012 This will be a pimple on the balance sheet for a few months lol I bet the bankers, Lawyers make 10 billion off this deal.