The rumors are true, Verizon agrees to a $130 billion deal
After a long week of speculation, the rumors have been confirmed. Verizon Communications Inc (NYSE:VZ) said on Monday it has agreed to buy out Vodafone Group Plc’s (NASDAQ:VOD) 45 percent stake in Verizon Wireless for $130 billion. Towards the end of last week both company’s watched their shares soar off speculatory headlines surrounding the deal. Initially the street had predicted the value at $125 billion, however, a combination of cash and stock brought the value of the transaction higher by $5 billion. Under the terms of the unanimously accepted deal, Vodafone would get $58.9 billion in cash, $60.2 billion in Verizon stock.
Analysts have already issued their opinions following the announcement. So far, it appears the reaction is to the positive side for both companies. Vodafone stands to collect a huge capital infusion, which can be used for a number of proposed projects with the company’s core markets. Moreover, shareholders may reap the benefits immediately through programs such as special dividends and share repurchase agreements.
For Verizon, earnings are expected to get an immediate boost. In a statement following the report, Verizon stated it expects the transaction to be immediately accretive to earnings per share by about 10 percent, without any one-time adjustments. While this deal may mark the end of a long, and rewarding partnership. The two companies will most certainly be in bed together down the road. As of Friday’s market close, Vodafone’s $60 billion position in Verizon would translate into over 40 percent ownership. Such a large position would guarantee sufficient say on the board, and within management.
The news of the deal comes on a market holiday within U.S. markets, however, in Europe shares of Vodafone continued to the upside by more than 3%. It will be interesting to see if shareholders of Verizon react well to such a large deal. As it stands today, this deal would fall into place as the third largest of all time.
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