Vodafone Shareholders Want Verizon Talks to Start at $120 Billion: Report

 
 
By Michelle Maisto  |  Posted 2013-04-29 Email Print this article Print
 
 
 
 
 
 
 

Shareholders say $120 billion, not $100 billion, is a reasonable place to begin negotiating for Vodafone's share of Verizon Wireless.

Verizon is anxious to move forward on a deal with Vodafone, either to merge with the England-based carrier or to buy out its 45 percent stake in Verizon Wireless, reports continue to confirm.

Verizon has been using analysts to help it work through negotiations with Vodafone, Bloomberg reported April 26. Verizon has circulated a figure of $100 billion as an opening bid for Vodafone's share of Verizon Wireless, which people familiar with the matter said Vodafone was "dismissive of," believing it to not be a "reasonable opening bid."

In response, six major Vodafone investors said $100 billion was not enough for Vodafone's stake in Verizon Wireless and urged Verizon to come up with an offer "of at least $120 billion," Reuters reported April 29.

Reuters interviewed investors, who estimated that an acceptable price would be between $120 billion and $135 billion.

Ralph Brook-Fox, an equities fund manager at Vodafone shareholder Ignis Asset Management, told Reuters that the "more palatable deal" might be the "merger or full takeover scenario."

It's been rumored that Verizon and rival AT&T could together come up with enough funding for a takeover scenario, in which case Verizon would gain full control of Verizon Wireless, and AT&T—which it's said has been wanting to invest outside the United States—would receive Vodafone's international holdings.

However, given that these include struggling markets such as Spain and Portugal, Vodafone's non-U.S. holdings are less tantalizing.

Brook-Fox pointed out to Reuters that, with all due respect, Vodafone has a "rather ugly set of assets, once you lose the Verizon Wireless stake."

The amount of taxes to be paid has been discussed as a determinant of whether the deal will take one route or the other. Initially, it was said that the merger would be the more efficient route, saving potentially tens of billions of dollars in taxes. But Verizon has said that's not necessarily the case.

Verizon CFO Fran Shammo acknowledged during Verizon's April 18 earnings call that acquiring Vodafone's share of Verizon Wireless is something the carrier has always been "very interested in."

"I will say, though," Shammo added, "that there has been a lot of speculation about the tax consequences of a purchase of this 45 percent, and we are extremely confident that such a transaction would be accomplished in a manner that is very tax-efficient and would not result in a tax on the gain in that stake."

Beyond that, Shammo said he had nothing more to say on the matter. At least not directly.

"By using analysts as a conduit, New York-based Verizon can send a message to Vodafone's shareholders about its intentions after failing to reach a deal in talks with executives as recently as December," Bloomberg reported. "After a 13-year partnership, Verizon is pushing harder for a deal now because of a rare convergence of low-interest loans, a high stock price and the prospect that regulators may close tax loopholes."

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