Speculation of a possible deal between Vodafone and Verizon Communications for their joint-venture Verizon Wireless has reignited after new reports that the companies are discussing a number of options.
Shares in the British operator were up 2.5% today…
Speculation of a possible deal between Vodafone and Verizon Communications for their joint-venture Verizon Wireless has reignited after new reports that the companies are discussing a number of options.
Shares in the British operator were up 2.5% today on the back of the news, and have now risen by more than 21% compared from their price on 1 January, from £154.45 then to as high as £189.95 on 25 March.
Vodafone could receive as much as US$135bn should it sell its entire 45% stake in the venture, which The Sunday Times reported is its preferred option. The paper did not reveal the source for the information.
However, the companies are also discussing a partial stake sale or a full-blown merger of the two parent companies. A deal could be struck in the summer, the paper reported citing investors, and industry and banking sources.
Other reports have suggested a slightly lower figure of US$115m for a sale of Vodafone’s Verizon Wireless stake.
UBS, Linklaters and McKinsey are advising Vodafone, Reuters said with reference to people familiar with the situation.
The impact of capital gains tax on any form of a Verizon Wireless stake sale is seen as a key question to any deal. Vodafone’s bill could be as high as US$30bn if it exits the US entirely, experts estimated. Some analysts have suggested this should encourage the operator towards a full merger with Verizon rather than sell its stake in the wireless venture. Vodafone shareholder Bronte Capital recently described suggestions of a sale of the stake in the JV as “absurd”, also referring to tax reasons.
However, Vodafone has privately told investors that it has options to mitigate or eliminate the tax liability, The Sunday Times reported.
Another begging question is what Vodafone would do with the money if it did sell the stake, which makes up 75% of the UK-based telco’s value.
But some still say that now is a good time for Vodafone to exit while the sterling is weak and Verizon Wireless’ valuation high.
Both Vodafone and Verizon have similar market capitalisations of around US$140bn, while their JV has been valued by analysts at between US$240bn and US$300bn.
Earlier in March it was revealed that the companies had held talks in December about a merger. Talks reportedly broke down as the two sides could not decide where to headquarter the combined company and who would lead it.
Vodafone and Verizon declined to comment.
