Will Vodafone Buy Verizon?

Author:
Publish date:

Vodafone considered plans to buy all of Verizon in order to acquire the 65 percent stake in the Verizon Wireless business it does not own, according Alphaville, the Financial Times blog run by Paul Murphy and Neil Hume. According to the plan, Vodafone would pay around $160 billion for Verizon, and then spin off the the landline business to a private equity consortium, according to Paul Murphy's report.
The story nicely reverses the conventional wisdom which held that Verizon would eventually buy out Vodafone's stake in the jointly owned wireless business. It's what folks used to call a "Pac Man" deal. You know, Pac Man is in danger of getting eaten by the ghost dudes until he bites the magic pill that lets him turn around and eat them instead.
Despite all the verbal parachutes and escape hatches the Alphaville guys put into their story, shares of Verizon indicated upwards in pre-trading after the story was published as part of the daily "Market's Live" discussion. Vodafone re-acted quickly to say that they have "no plans" to acquire Verizon. But they would probably say that anyway. No-one ever has any plans until they are ready to actually execute the plans.
Will this deal happen? Alphaville puts its odds at around thirty-percent. We spoke to some investment bankers who said that they had talked to private equity people who had expressed some interest in participating in the spin-off portion of the deal. Alphaville's Paul Murphy told CNBC this morning that Vodafone had looked at the plans over the course of weeks and in some detail.
So what it sounds like to us is the usual investment banker driven acquisition story. Investment bankers most likely approached Vodafone with the plan. They probably put some feelers out to private equity dealmakers to test the spin-off portion of the transaction. Vodafone probably looked at the pitch books, and had some meetings with bankers.
But by focusing on the "eye-popping" $160 billion takeover bid, market watchers may be overlooking the other story from Alphaville: that Vodafone is also considering exercising a little known put-option that would let it force Verizon to buy back the wireless business at a cost of $20 billion. That would certainly help Vodafone cheif Arun Sarin win over disgruntled shareholders who have been pressuring the company to focus on cash generation over M&A driven expansion.
Vodafone’s extraordinary $160bn Verizon plan [FT Alphaville]
Vodafone dismisses Verizon bid talk [Telegraph]

Related