Vodafone $160 Billion Verizon Takeover Unlikely
A $160 billion Vodafone purchase of Verizon is unlikely, UBS analysts said Monday. The Financial Times reported Monday that European mobile phone company Vodafone was considering an all-stock buy of Verizon, after which it would spin off its wireline business to a private equity consortium. The paper cited “well placed financiers” as providing insights. Not so, said Vodafone. “Vodafone wishes to make it clear that it has no plans to make such an offer,” it said. Verizon declined to comment. But even if Vodafone is eyeing Verizon, regulatory hurdles and transaction structure would be problematic, UBS said.
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Getting regulatory approval “would be extremely difficult,” since the deal would involve the largest European telco buying the second-largest American telco, UBS said. The transaction likely would require approval from at least 24 state PUCs, it said. MCI’s large presence in the U.S. government market also could make things tricky, it added.
A wireline spin-off to a private equity consortium might not be popular with shareholders, UBS said. “Paying a premium for all of Verizon only to keep 50 percent of the business would be hard to justify,” UBS said. And a structure reliant on private equity buyers could be difficult since Verizon has an estimated $90 billion wireline business, it said.
Buying Verizon would create a business worth $300 billion, putting Vodafone ahead of AT&T as the world’s largest telco, Financial Times said. If it does not buy Verizon, Vodafone could force Verizon to pay up to $20 billion to buy back its wireless business by exercising a put option it holds over part of its Verizon stake, the paper said. Vodafone has been under shareholder pressure about its 45 percent stake in Verizon Wireless. Investors say the venture has not paid off. The company last month rejected a proposal by shareholder group Efficient Capital Structures to spin off its Verizon Wireless stake (CD June 11 p11).