Vodafone in €98bn buyout of Verizon

The boards of Verizon Communications and Vodafone were expected to vote this weekend on a $130 billion (€98bn) deal, funded by about $65bn (€49bn) of debt, to give the US telecom giant complete ownership of Verizon Wireless.

A deal, which the sources said could be announced as soon as today, would cap Verizon’s decade-long effort to win full control of the number one US wireless provider.

At $130bn, it would be the third-largest corporate acquisition of all time and mark Vodafone’s exit from the large but mature US market. Vodafone owns 45% of the Verizon Wireless joint venture that was formed in 2000.

Verizon plans to pay for half of the purchase with its own stock. For the rest, it has tapped JP Morgan Chase, Morgan Stanley, Barclays and Bank of America Merrill Lynch to help raise the funds through a mix of bonds and bank loans.

Since Verizon already had operational control of the wireless company, the deal is not expected to create any changes for its customers, but its additional financial firepower could help the company boost its service going forward.

After the deal, Vodafone will have assets in Europe and emerging markets such as India, Turkey and Africa. But it raises questions about what the company will do with the windfall.

A deal would come amid a spate of consolidation attempts, both successful and failed, in the telecom industry over the past few years.

An agreement over Verizon Wireless would mark the culmination of on-again, off-again discussions going as far back as 2004, when Vodafone bid for AT&T’s wireless business and would have had to shed its Verizon Wireless stake. The British company, however, lost that bid to Cingular, and has since held on to the Verizon Wireless stake for its exposure to the US wireless market.

The news of Verizon’s latest efforts was first reported by Reuters in April. At the time, sources said Verizon had hired advisers to prepare a $100bn cash and stock bid to take full control of Verizon Wireless. Verizon was ready to push aggressively but preferred a friendly deal.

But Vodafone CEO Vittorio Colao was biding his time, making it clear he would only sell the 45% stake at what he considered the right price.

Talks picked up in earnest a few weeks ago, however, as Verizon grew concerned that its window of opportunity may be closing, with interest rates going up and its own stock declining.

That prompted Verizon to raise the offer price from the $100bn it had initially envisioned to around $130bn.