Two large shareholders in Verizon Communications said they would be happy to pay up to $130 billion to bag the 45 per cent stake held by the Vodafone Group in Verizon Wireless, according to a Reuters report.
It’s the latest in a series of disclosures about what some investors, on both sides of the Atlantic, are really thinking about a deal that would see Verizon Communications fully own its highly profitable wireless subsidiary.
Last week, Reuters revealed that Verizon had hired advisers to prepare a $100 billion cash-and-stock bid for Vodafone’s 45 per cent stake. Several major Vodafone investors apparently bristled, however, at what they saw as too low a price.
A willingness to trump the $100 billion figure by up to 30 per cent may well give sale talks new life.
“I think shareholders would be willing to accept a price as high as $130 billion because it would still be accretive to Verizon,” said Craig Leopold, portfolio manager at Columbia Management Investment advisors, in the report. Unsurprisingly, he adds that “the preference would be a lower price like $120 billion”.
Leopold’s firm, says Reuters, is Verizon’s tenth-largest shareholder.
There are still investor worries, however, that Verizon would have to find at least $50 billion of debt in a 50-50 cash and stock bid for Vodafone’s stake, which, in turn, would damage Verizon’s credit rating.
One concern facing Vodafone – aside from losing a strong source of operational profits and becoming more dependent on slowing markets in Europe – is the amount of capital gains tax it would have to pay to US government coffers if it sold up its Verizon Wireless stake.
Fran Shammo, CFO at Verizon Communications, is nonetheless convinced that this need not be a showstopper. Speaking at Verizon’s Q1 2013 earning call on 18 April, he said “we are extremely confident that such a transaction [for Vodafone’s 45 per cent stake] could be accomplished in a manner that is very tax-efficient, and would not result in a tax on the gain in that stake”.