Verizon Could Raise $80 Billion to Buy Out Vodafone Stake
Published on: 18th Mar 2013
Note -- this news article is more than a year old.
By: Ian Mansfield
A Citi analyst has suggested that Verizon Communications could raise upwards of USD80 billion of fresh debt if it were to buy out Vodafone's 45% stake in their US joint venture.
Citigroup's Michael Rollins issued a research note that said that there is now a greater likelihood that Verizon will seek to finally settle its long stated desire to buy Vodafone's stake.
In the note he wrote that a deal by Verizon Communications is "more open today from a combination of low-interest rates, favorable VZW performance, lower debt leverage at the VZ parent level, strong dollar vs. Sterling & the Euro, VZW already paying a dividend to its parents, & improvement in domestic Telco valuations."
He also noted that Vodafone would be likely to be a bigger beneficiary of the deal that Verizon, from a perspective of share price performance.
He also analysed the various options for a deal, should one take place, saying that there was a more than 50% chance of a pure cash sale, and a 15% chance of a full merger between the two companies. A previously suggested idea that Vodafone would accept Verizon shares in exchange for the Wireless stake was ruled as unlikely.
He also clarified the likely tax liabilities for Vodafone to the US government at around USD5 billion due to the fact that Verizon Wireless also owns stakes in Vodafone networks in Germany and Italy. If these are to become wholly Vodafone subsidiaries, then the Verizon Wireless stakes would need to be transferred to a non-US holding company, triggering the tax bill.
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