* Verizon to buy Vodafone's 45 pct of Verizon Wireless
* Ends decade-long stand-off between both companies
* Vodafone to return 71 percent, $84 bln, to shareholders
* Will be third-largest deal of all time
By Kate Holton and Sinead Carew
LONDON/SAN DIEGO, Sept 2 Verizon Communications
agreed on Monday to pay $130 billion to buy Vodafone
out of its U.S. wireless business, signing history's
third largest corporate deal to bring an end to an often
fractious 14-year marriage.
The two firms said Vodafone would get $58.9 billion in cash,
$60.2 billion in Verizon stock, and an additional $11 billion
from smaller transactions in a deal that is due to close in the
first quarter of next year.
The British group will return 71 percent of the net proceeds
to shareholders, including all of the stock, in a sign that it
does not expect to go on a new acquisition spree across its
remaining core European and emerging markets.
The move to sell out of the joint venture closes a heady
expansionist chapter for Vodafone, one of Britain's best-known
companies, which grew rapidly over the last 20 years through a
spate of aggressive deals, taking its brand into more than 30
countries across Europe, Africa and India.
The deal is also likely to be the defining event in the
careers of Vittorio Colao and Lowell McAdam, the chief
executives of Vodafone and Verizon, who rebuilt relations
between the two sides, which had long argued over issues
including the level of dividends to be paid from Verizon
The deal will become the third largest announced deal in the
world after Vodafone's $203 billion takeover of Germany's
Mannesmann in 1999 and AOL's $181 billion acquisition of Time
Warner the following year.
"This has been a highly productive partnership in a business
with excellent momentum," Colao told reporters, adding that he
was "super committed" to the next chapter of the company. McAdam
said simply that the time was right to buy.
"Today's announcement is a major milestone for Verizon, and
we look forward to having full ownership of the industry leader
in network performance, profitability and cash flow," he said.
The boards of Verizon and Vodafone unanimously approved the
The deal will give Verizon full access to the wireless
unit's cash, handing it fresh firepower to invest in superfast
mobile networks and fend off challengers in a U.S. market
expected to grow more competitive in the coming years.
Verizon said it expected the transaction to be immediately
accretive to earnings per share by about 10 percent, excluding
any one-time adjustments.
While Vodafone will lose its best asset, it will get a war
chest that it can use to reward shareholders and bolster its
European operations, which are under pressure from recession and
The British firm said it planned to launch a new investment
phase dubbed Project Spring to improve its mobile and broadband
networks over the next three financial years.
After returning $84 billion of the sale proceeds to its
shareholders, Vodafone will be left with a $30 billion cash
pile. Some $10 billion will go to the Project Spring network
investment programme and the rest will be used to pay down debt,
bringing down leverage to one times forward operating profit
Surprisingly, Vodafone is keeping little of the cash on hand
for acquisitions, although Colao said that the group could
always borrow later if attractive deal opportunities crop up
that would create value for shareholders.
Asked where he might consider acquisitions, Colao said only:
"I would say first let's complete the deal, then we will talk
about our strategy."
Both groups said they would be in a position to increase
their dividend. Verizon declared a quarterly dividend of 53
cents per share, an increase of 1.5 cents, or 2.9 percent, from
the previous quarter. Vodafone announced an 8 percent increase
to its total 2014 financial year dividend per share.
Vodafone will be left with a U.S. tax liability of around $5
Boutique M&A firm Guggenheim Partners advised Verizon on the
deal, as did Paul Taubman, a former banker at Morgan Stanley.
A group of banks - JPMorgan, Morgan Stanley, Bank of America
Merrill Lynch and Barclays - will underwrite just over $60
billion in debt financing to fund Verizon's deal, sources
Goldman Sachs and UBS advised Vodafone.