Verizon Prepares $100 Billion Bid To Takeover Verizon Wireless

[dgstorm]

At first blush you might think the title of the story is a mistake, but it turns out it is not. If you didn't know this already, apparently Vodafone still owns 45% of Verizon Wireless, and Verizon only owns a majority stake of 55% of their own wireless company. News from Reuters today shared that Verizon Communications is now planning to change that with a takeover bid of $100 Billion dollars to buyout the rest of Vodafone's shares in VZW.

Interestingly, it appears that this huge sum is still too low however. Apparently, Vodafone would like to hold out for $135 Billion, but will likely end up taking somewhere between $120-130 Billion at some point in the negotiation. Of course, Verizon is also doing its best to add value to the transaction, and will be doing so by offering to foot some of the eventual tax bill of such a transaction. A deal of this size could incur a tax bill of around $20 Billion, but supposedly, the two companies are working toward getting that bill down to about $5 Billion for Vodafone's end of things. Here's a quote with some additional detail,

The two sources said Verizon was now ready to push more aggressively. It hopes to start discussions with Vodafone soon for a friendly agreement but is prepared to take a bid public if the British company does not engage, one of the sources added.

"I don't really see this as a surprise," one of Vodafone's 15 largest investors told Reuters, on condition of anonymity. "The talk about this deal has been quite intense recently.

"They should look to return a large amount to shareholders, retaining a relatively small amount for deleveraging and bolt-on deals. I don't think shareholders would be pleased with Vodafone viewing any disposal proceeds as an acquisition war chest."

Vodafone Chief Executive Vittorio Colao has so far said he has an open mind on whether to sell the group's 45 percent stake, which has come to make up around 75 percent of the firm's value in recent years as its core European business suffered.

Some analysts believe the Italian, who has won praise for his dealmaking in almost five years at the top of the group, could try to hold on to the asset for a little longer, until he sees some sign that his core European businesses are starting to stabilize.

But Colao will also know that the U.S. market could become more competitive due to a wave of consolidation, so he could decide that it might soon be the right time to walk away.

"The tax problem has always been the issue. If a way can be found around that, then it is highly likely that a deal will be done," the top-15 investor said.

Another way to avoid the tax issue would be for the two parent groups to merge, but Verizon said earlier this month that it was not looking to buy or merge with its partner.

Verizon, which is benefiting from record low interest rates as well as its own strong stock price, is instead confident that the company can raise about $50 billion of bank financing, the sources said. It plans to pay for the rest of the deal with its own shares, they added. The sources asked not to be named because the discussions are confidential.

It's amazing to see the amounts of money being thrown around for a deal like this, and it also seems a bit ironic (for those who didn't know this already) that Verizon doesn't actually own all of Verizon Wireless. Share your thoughts.

Source: Reuters

 

[Hugh Jass]

That's nuts, one company is more valuable than the GDP of most developing nations. :icon_eek:

 

[The Stig 04]

So these guys have $100billion+ to spend at any given moment and they are still trying to shaft the customer....

 

[kevsgroove]

So these guys have $100billion+ to spend at any given moment and they are still trying to shaft the customer....

That's how they came up with $100 billion walking around money. :happy3:

 

[dgstorm]

Just for the sake of clarity, Verizon will need to get $50 Billion of that amount financed (borrow it), and much of the rest of it will be paid in stock to Vodafone. Not that this makes a huge difference in your perfectly valid arguments...

 

[jspradling7]

And the "gov" gets 20 billion for watching one company sell paper to another comapny.