Zimpapers Logo

LONDON. – US telecoms giant Verizon and Vodafone announced Monday they had agreed the British company would sell out its 45 percent stake in their joint venture Verizon Wireless for US$130 billion.The blockbuster deal – which would be one of the biggest transactions in corporate history – would allow Vodafone to bounce back from hefty losses, pay down debt, make new acquisitions and return money to shareholders, according to analysts.

The deal also marks the group’s exit from the United States market and injects several billion euros into the British economy that is struggling to lift out of the doldrums.

The company’s share price jumped 3,59 percent on Monday to close at 213,65 pence before the announcement the deal had been concluded, while London’s FTSE 100 index rose 1,54 percent overall.
Vodafone had earlier confirmed talks were advanced.

Verizon said it will pay Vodafone US$58,9 billion in cash and issue common stock currently valued at approximately US$60,2 billion, with other items accounting for the balance.

Vodafone said that it would return US$84 billion of the funds it receives back to shareholders and plough over US$9 billion into organic investments over the next three years to improve its networks and services.

It said shareholders would receive all Verizon shares and nearly 24 billion in cash “totalling US$84,0 billion, equivalent to 112p per share and representing 71 percent of the net proceeds” from the transaction.

Major shareholder Standard Life welcomed the sale, with investment director Andrew Millington telling the Financial Times it would leave Vodafone with “control over a greater proportion of its cash flow, a strengthened balance sheet, and the opportunity to return a large amount of capital to shareholders”.

Vodafone Group chairman Gerard Kleisterlee said the company’s investment in Verizon Wireless has created a great deal of value for shareholders and “Verizon’s offer now provides us with an opportunity to realise this value at an attractive price”.

He added the “transaction will position Vodafone strongly to pursue our leadership strategy in mobile and unified communication services for consumers and enterprises both in our developed markets and across our emerging markets businesses”.

The gigantic buyout will be the second-biggest merger and acquisition deal in global corporate history, according to data firm Dealogic.
The world’s biggest M&A deal remains Vodafone’s purchase of Germany’s Mannesmann for US$172 billion including debt, in 1999.
The deal would be so big that some analysts said the effect on the British economy would be as great as the hundreds of billions of pounds injected into the British economy since 2009 by the central bank, the Bank of England. – AFP.