Verizon urged to raise its $100bn bid to buy out Vodafone stake

Their comments follow reports last week that Verizon had hired advisers to prepare a possible $100bn bid to buy Vodafone’s 45 per cent stake in their Verizon Wireless joint venture, likely to be structured as a roughly 50:50 cash and stock bid.

Should the $100bn figure stand, the six shareholders, with around 1.3 billion of Vodafone’s shares between them, said they would prefer the group to push for a full merger with Verizon instead.

The main concern among some investors was the fact that a sale of Verizon Wireless – the best performing asset by far in the Vodafone portfolio – would highlight the operator’s exposure to its troubled European markets.

“Without wishing to be too disrespectful, Vodafone is sitting with a rather ugly set of assets once you lose the Verizon Wireless stake,” said Ralph Brook-Fox, UK equities fund manager at 
Ignis Asset Management, a top 40 institutional shareholder in Vodafone.

“I think the merger or full takeover scenario, although not at the forefront of discussions right now, could actually end up being the more palatable deal.”

Verizon Communications released a statement earlier this month to say it did not have any intention to merge or make an offer for Vodafone following bid speculation.

Vodafone’s share of Verizon Wireless represented around half of the group’s adjusted operating profit in the six months to the end of September 2012, according to its financial results.

It also received before the end of 2012 a £2.4bn dividend from its Verizon Wireless stake, and said it would pass on £1.5bn to its shareholders via a buyback, showing the importance to the group of its holding.

Among its core European operations Vodafone operates in crisis-hit and heavily regulated markets such as Italy, Spain and Portugal, where revenues have come under pressure because of economic turmoil and intense competition.

With that in mind, some investors would rather an offer for the stake at between $120bn and $135bn as acceptable.

At its current share price, Vodafone’s whole market capitalisation stands at around $146bn.

“I think $120bn is the point where you think you’ve got a decent premium,” one top 20 shareholder said. “I think that’s reasonable.

“If they achieve that, I think the (Vodafone) shares go up.”