* Verizon lined up four big banks to finance deal
* Full terms expected after London stock market closes
* Big Vodafone investor likes the deal
* Structure will limit Vodafone tax bill
By Soyoung Kim and Kate Holton
NEW YORK/LONDON, Sept 1 Verizon Communications
and Vodafone plan to announce a $130 billion deal
on Monday that will give the U.S. telecom giant complete control
of Verizon Wireless, subject to final board approval, people
familiar with the matter said.
Vodafone said in a statement late on Sunday it was in
advanced talks with Verizon to sell its 45 percent stake in the
joint venture for $130 billion, comprising cash and common
shares, but that there was no certainty an agreement would be
"A further announcement will be made as soon as
practicable," it said of the deal to exit the largest mobile
operator in the U.S..
Under the terms of the proposed agreement, Vodafone would
get $60 billion in cash, $60 billion in Verizon stock, and an
additional $10 billion from smaller transactions that will take
the total deal value to $130 billion, two of the people familiar
with the matter said on Saturday.
To fund the cash portion of the deal, Verizon has lined up
as much as $65 billion in financing from four banks: JPMorgan
Chase & Co, Morgan Stanley, Barclays Plc
and Bank of America Merrill Lynch, they said. The banks
have committed to the financing which is expected be split
evenly among the four, two people said.
A full announcement of the terms is expected to come after
the stock market closes in London on Monday, after the board of
Verizon meets earlier in the day to vote on the proposed
transaction, people familiar with the matter told Reuters.
Vodafone's board was scheduled to meet on Sunday to approve
the deal, the people said. Both groups declined to comment.
If the deal is concluded, it will end one of the
longest-running corporate standoffs, which has at times seen
both partners seek to buy out the other in times of weakness.
For Verizon, it means that it no longer has to share the
billions in cash generated by Verizon Wireless.
On the Vodafone side, Chief Executive Vittorio Colao will
get a war chest of cash to reward shareholders and potentially
carry out acquisitions to strengthen the group's European and
emerging market operations.
All the people asked not to be identified because the matter
is not public.
An agreement over Verizon Wireless would mark the
culmination of on-again, off-again discussions going as far back
as 2004, when Vodafone bid for AT&T Inc's wireless
business in a move that would have required it to shed its
Verizon Wireless stake.
The British company lost that bid and has since held on to
the Verizon Wireless stake for its exposure to the highly
profitable U.S. wireless market, saying it would only sell if
Verizon offered a price that was more valuable to its
shareholders than the status quo.
At $130 billion, it would be the third-largest corporate
deal of all time.
A top 10 Vodafone investor told Reuters last week that $130
billion would be "a good price" that shareholders would welcome.
"Colao's done a good job over the last five years. He's done
well not to have sold the U.S. sooner. There were people calling
for him to sell the U.S. business three or four years ago and
clearly it's been the right thing to do not to do that because
it's grown in value hugely over that time.
"Taking the big picture, I think the management has done a
good job and if they get the mooted price for Verizon they'll be
treated as heroes."
Talks picked up in earnest a few weeks ago, as Verizon grew
concerned that its window of opportunity was closing, with
interest rates due to rise and its own stock price declining.
That prompted Verizon to raise the offer price from the $100
billion it had initially floated to around $130 billion, sources
Even after the bump in price, the deal is expected to be
accretive to Verizon's earnings, one of the sources said.
Another hindrance to a deal has been the possibility of a
huge tax bill for Vodafone from the sale, based on Verizon
Wireless' massive growth since it was established. But the
sources said the deal would be structured in such way that
Vodafone's tax bill could be cut to around $5 billion.
A deal would add to the spate of telecom acquisitions this
year in Europe and the U.S.. Most recently, Japan's SoftBank
Corp took control of Sprint Nextel Corp, the No. 3 U.S.
wireless provider, in a $21.6 billion deal that could make the
U.S. market more competitive.
Although overall M&A activity remains lower than last year
at this time, the telecom sector has been a bright spot of
deal-making. According to Thomson Reuters data, telecom deals
were up 36 percent this year, with 358 deals worth $60.9
billion, not including the potential Verizon-Vodafone deal.