Game of Phones: Verizon Communications wants to own Verizon Wireless joint-venture
Verizon Communications is reportedly preparing a cash and stock bid worth $100 billion (£65bn) to acquire Vodafone’s 45 percent stake in Verizon Wireless, the US operator that the two companies co-own.
Reuters says that a formal bid has not been made, but that Verizon has hired both banking and legal advisers ahead of a possible offer to take full control of the business that it has long coveted.
It is believed that the companies have been engaged in high level talks regarding a number of options, with Vodafone apparently unwilling to sell due to the possibility that it will incur a $20 billion (£13bn) capital gains tax charge.
Game of Phones
The tax charge prompted speculation that Verizon was prepared to buy or merge with its British partner, instead of just its US wireless venture, but Vodafone denied this possibility earlier this month. Instead, it is convinced that it can whittle any potential tax bill down to $5 billion (£3.2bn).
Even if Vodafone is a willing seller, it is believed that $100 billion (£65bn) is not enough to convince it to part with its US assets. Commentators see this as an opening bid designed to bring the company to the negotiating table.
It has been suggested that a bid of $125-130 billion (£81-84bn) would be enough to secure the stake, which now accounts for an estimated 75 percent of Vodafone’s total value as its core European business has struggled.
Vodafone could return some of the money to shareholders and invest in fixed line assets in Europe. Meanwhile, a Vodafone with no US mobile business would be a much more attractive target for a takeover by AT&T, which is rumoured to be in the market for a European operator.
Ironically, had Vodafone been successful with its own takeover bid of AT&T in 2004, it would have been forced to surrender its 45 percent stake in Verizon Wireless.
Verizon Communications will apparently discuss any potential takeover at its annual shareholder meeting and hopes to secure a friendly agreement but will be more aggressive if it encounters resistance from Vodafone.
Vodafone has previously employed a strategy of holding minority stakes in overseas operators until it was in a position to strengthen its position. This has worked well in places like South Africa, but it has faced stalemates in a number of territories, causing investors to place pressure on the company to relinquish such holdings.
It has retreated from a number of markets, including France, China and Japan, and split its European unit in two.
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