Verizon today announced that it had reached an agreement with it's partner owner Vodafone, to buy back the 45 percent ownership of Vodafone in Verizon for an estimated $130 Billion. The deal will give Verizon back 100% of it's ownership, while paying $58.9 Million in cold hard cash and the remainder in Verizon stock to Vodafone shareholders.
This deal is expected to be finalized in early 2014. Tomorrow, September 3rd, Verizon will hold a press conference to explain the details of the deal and what it means for the future of Verizon.
The transaction was unanimously approved by the boards of directors of Verizon and Vodafone, and is subject to customary closing conditions, including regulatory approvals and the approval of both companies’ shareholders. The transaction is expected to close in the first quarter of 2014.
The transaction would provide Verizon with 100 percent ownership of the industry-leading wireless carrier in the United States. As a wholly owned entity, Verizon Wireless will be better equipped to take advantage of the changing competitive dynamics in the market and capitalize on the continuing evolution of consumer demand for wireless, video and broadband services.
Lowell McAdam, Verizon chairman and CEO, said: “Over the past 13 years, Verizon Wireless has been a key driver of our business strategy, and through our partnership with Vodafone, we have made Verizon Wireless into the premier wireless provider in the U.S. The capabilities to wirelessly stream video and broadband in 4G LTE complement our other assets in fiber, global IP and cloud. These assets position us for the rapidly increasing customer demand for video, machine to machine and big data. We are confident of further growth in wireless, and our business in its entirety.”
McAdam continued: “This transaction will enhance value across platforms and allow Verizon to operate more efficiently, so we can continue to focus on producing more seamless and integrated products and solutions for our customers. We believe full ownership will provide increased opportunities in the enterprise and consumer wireline markets.”
McAdam concluded: “Verizon Wireless is the greatest wireless company in the world, and a big part of this success was due to the hard work of both partners, Vodafone and Verizon. The timing was right to execute a transaction that benefits both companies and their shareholders. Today’s announcement is a major milestone for Verizon, and we look forward to having full ownership of the industry leader in network performance, profitability and cash flow.”
Vittorio Colao, Vodafone Group CEO, said: “This transaction allows both Vodafone and Verizon to execute on their long-term strategic objectives. Our two companies have had a long and successful partnership and have grown Verizon Wireless into a market leader with great momentum. We wish Lowell and the Verizon team continuing success over the years ahead.”
Quarterly Dividend Increase
Demonstrating the importance of its dividend policy to deliver value for shareholders, Verizon also announced today that its Board of Directors has declared a quarterly dividend of 53 cents per outstanding share, an increase of 1.5 cents per share, or 2.9 percent, from the previous quarter. On an annual basis, this increases Verizon’s dividend 6 cents per share, from $2.06 to $2.12 per share.
Financing and Approvals
The transaction consideration of $130 billion consists of a combination of cash, Verizon common stock and other items.
Verizon will pay Vodafone $58.9 billion in cash. To fund this portion of the consideration, Verizon has entered into a fully executed $61.0 billion Bridge Credit Agreement with J.P. Morgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc., Bank of America, N.A. and Barclays. Verizon intends to reduce the commitments under the Bridge Credit Agreement with the issuance of permanent financing. In addition, Verizon expects to maintain capital structure, balance sheet and financial policies consistent with investment-grade credit metrics, in part based on 100 percent access to Verizon Wireless’ cash flow.
Verizon will also issue common stock currently valued at approximately $60.2 billion to be distributed to Vodafone shareholders, subject to a collar arrangement with a floor price of $47.00 and a cap price of $51.00 that will determine the maximum and minimum number of shares to be issued upon closing of the transaction. In addition, Verizon will issue $5.0 billion in notes payable to Vodafone, and Verizon will sell its 23.1 percent minority stake in Vodafone Omnitel N.V. to Vodafone for $3.5 billion. The remaining $2.5 billion of the transaction value will be a combination of other consideration.
Guggenheim Securities, LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Paul J. Taubman served as lead financial advisors to Verizon, and J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC also rendered fairness opinions in connection with the transaction. Barclays and BofA Merrill Lynch served as financial advisors to Verizon. Wachtell, Lipton, Rosen & Katz and Macfarlanes LLP are serving as transaction counsel to Verizon, and Debevoise & Plimpton LLP is advising Verizon on its debt financing.
Verizon executives will hold a conference call for investors and analysts to discuss further details of this transaction at 8 a.m. Eastern time tomorrow, September 3. There will also be a live webcast of the call on Verizon’s Investor Relations website, www.verizon.com/investor, where presentation materials will be posted. Dial-in numbers are 888-455-3018 for domestic callers, and 773-799-3816 for international callers; the passcode is "VERIZON."
A replay of the webcast will be available within two hours after the call. The webcast will be accessible on Verizon’s Investor Relations Web site, www.verizon.com/investor.