The on-again, off-again discussions between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group PLC (NASDAQ: VOD) for a Verizon buyout of Vodafone’s 45% stake in Verizon Wireless are reportedly on again. Vodafone has confirmed that discussions are taking place, according to the Wall Street Journal.
The last time talks between the partners made news was in April, when Verizon and AT&T Inc. (NYSE: T) were said to be considering a deal that would have included a complete buyout of Vodafone, not just the company’s stake in Verizon Wireless. Verizon officially denied the rumored talks, and under European rules, the denial prohibits (with some exceptions) Verizon from making an offer for Vodafone for at least six months. That six-month period ends in early November.
A buyout of Vodafone’s stake in Verizon Wireless would cost between $100 billion and $130 billion, with Verizon looking to pay the lower figure and Vodafone looking to get the higher. Even the lower number is a nose-bleed amount. The Wall Street Journal cites sources who claim an acquisition would include cash and Verizon stock in roughly equal amounts.
Vodafone’s announced strategy is to depart any joint venture it does not control, and Verizon Wireless certainly qualifies. The U.K.-based firm also is expanding outside its telecom roots, most recently with the $10 billion acquisition of a German cable operator. Another $50 billion or so in cash from Verizon would top up Vodafone’s acquisition war chest.
But not all of Vodafone’s shareholders are excited about a proposed sale. In the first place Vodafone’s stake in Verizon Wireless is its best asset. Then there is a tax bill that could top $10 billion. Finally, a sale would leave Vodafone almost totally at the mercy of the shaky European economy.
Vodafone’s American Depositary Shares (ADS) are up 8.4% shortly after trading began on Thursday at $31.89, a new 52-week high if it holds. The 52-week low is $24.42. One ADS is equal to 10 London-traded ordinary shares.
Verizon’s shares are up 4.3% at today’s opening, in a 52-week range of $40.51 to $54.31.