Verizon Communications Inc. (VZ) To Buy Out Vodafone’s 45% Stake In Joint Venture For $130 Billion

Posted Sep 2, 2013

Verizon Communications Inc. (NYSE:VZ) has agreed to buy out Vodafone’s 45% stake in their joint venture, Verizon Wireless, for $130 billion.  This is one of the largest telecommunications deals on record.  Verizon and Vodafone have been joint venture partners for the past 14 years.

Vodafone shareholders will receive 71% ($84 billion) in both cash and shares.  This includes $60 billion of Verizon shares, which many Vodafone investors will likely sell, and another $24 billion in cash.  The agreed upon amount was larger than what was expected by analysts.

?After years of talks, we received an offer that was good value for shareholders,? stated Vodafone?s chief executive officer Vittorio Colao. ?It was a good move for both partners and we were able to find the right price.?

The cash-and-stock deal includes a $58.9 billion cash component as well as a further $60.2 billion in Verizon shares.  Verizon will also hand Vodafone its current 23% holding in Vodafone Italy for $3.5 billion as part of a series of smaller transactions connected to the deal.

Third Largest Corporate Deal

This is the third largest corporate deal in history.  The first two largest deals are Vodafone’s $203 billion takeover of Germany’s Mannesmann in 1999 and AOL’s $181 billion acquisition of Time Warner the year after.

Verizon Wireless and Vodafone unanimously approved the sale.  Verizon will get full access to the wireless unit’s cash as a result of the deal.  Verizon is expecting the transaction to be immediately accretive to earnings per share by about 10%, excluding any one-time adjustments.

Project Spring

Vodafone will be launching a new investment phase called Project Spring to improve their mobile and broadband networks over the next three years.

After Vodafone returns $84 billion of the sale proceeds are returned to its shareholders, Vodafone will be left with $30 billion.  Around $10 billion will go towards the Project Spring network investment program and the rest will be used for paying down debt.

Vodafone will not keep much cash for acquisitions.  Vodafone could borrow later if certain deal opportunities come up.