Vodafone exits Verizon Wireless for $130 bn

Vodafone has announced that it has reached an agreement to dispose of its US group whose principal asset is its 45 percent interest in Verizon Wireless to Verizon Communications, Vodafone’s joint venture partner, for a total consideration of $130 billion (£84 billion).

Vodafone has agreed to dispose of its US group whose principal asset is its 45 percent interest in Verizon Wireless to Verizon for a total consideration of $130 billion. The consideration, subject to the adjustments as described below, comprises $58.9 billion in cash, $60.2 billion in Verizon shares, $5.0 billion in the form of Verizon loan notes, $3.5 billion in the form of Verizon’s 23 percent minority interest in Vodafone Italy and $2.5 billion through the assumption by Verizon of Vodafone net liabilities relating to the US Group.

Vodafone group chairman Gerard Kleisterlee said, “Our sustained investment in Verizon Wireless has created a great deal of value for shareholders from a market leader with great momentum. Verizon’s offer now provides us with an opportunity to realise this value at an attractive price.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.”

It will also enable us to provide substantial returns to individual shareholders and to the investment funds relied upon by savers and pensioners added Kleisterlee.

Vodafone Group chief executive Vittorio Colao said, “As a result of the transactions, we will also greatly enhance Vodafone’s long-term prospects through Project Spring, our new programme of additional organic investments in 4G, 3G, fibre and broadband, enterprise services and improved customer experience across all of our markets. Project Spring will strengthen and accelerate our existing Vodafone 2015 strategy, enabling us to take even greater advantage of the growing global demand for ubiquitous high-speed data.”

This will in turn underpin our intention to grow the dividend per share annually, in line with our track record of providing shareholders with sustainable and high quality returns added Colao.

Verizon Communications chairman and chief executive Lowell McAdam said, “These transactions mark the culmination of a sustained and highly productive relationship between Verizon and Vodafone, and provides a very strong foundation for both companies to achieve their respective long-term strategic goals. I wish Gerard, Vittorio and the Vodafone team all the best for the future.”

Verizon has the right to increase the cash portion of the total consideration by up to $15 billion, and to decrease the number of Verizon shares to be issued accordingly. If Verizon exercises this right, the intended distribution to Vodafone shareholders will include this additional cash in lieu of the relevant number of Verizon shares.

Vodafone and Verizon have also agreed that Vodafone will acquire Verizon’s 23 percent minority interest in Vodafone Italy for $3.5 billion, thereby securing full ownership of Vodafone Italy.

Vodafone intends to implement a new organic investment programme, Project Spring, to establish further network and service leadership through additional investments of £6 billion over the next three financial years.

The reorganisation will give rise to a US tax liability estimated at approximately $5 billion under standard US tax rules and based on the current valuation of those RoW interests.

Due to its size, the Verizon transaction will be a Class 1 transaction under UK Listing Rules. In addition, as Verizon is a related party in relation to Vodafone, both the Verizon transaction and the Vodafone Italy transaction will be related party transactions under the UK Listing Rules.

For these reasons, the transactions require the approval of Vodafone shareholders, which will be sought at a Vodafone general meeting to be convened in due course.  Vodafone and Verizon have agreed that the transactions will be put to Vodafone shareholders for approval together and not separately.

Subject to the satisfaction of certain conditions precedent, the transactions are expected to complete in Q1 2014.

 

 

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