Vodafone in talks over £83.8bn sale of stake in Verizon

Vodafone has confirmed it is in talks over a deal that will see it exit the United States through one of the largest corporate transactions of all time.

Verizon has made no secret of its desire to gain full ownership of a network that is growing at a rapid rate and generating billions of dollars in free cash flow, but the companies have tussled over how such a deal should be valued.

Vodafone’s chief executive Vittorio Colao has bided his time, waiting for the optimal moment to sell the 45 per cent stake in a deal that would leave the world’s second largest mobile operator with assets in Europe and emerging markets such as India, Turkey and Africa.

Verizon and Vodafone were discussing a sale for around £83.8bn in talks that had resumed a few weeks ago, according to sources.

Bloomberg reported that Verizon could pay as much as $130bn and is working with several banks to raise $10bn from each to finance about $60bn of the deal.

Reuters reported in April that Verizon had hired advisers for a possible $100bn bid, an opening gambit that analysts and investors said was too low, putting the value of Vodafone’s holding nearer $120bn.

The statement from Vodafone yesterday confirming talks sent its shares up 9 per cent to a 12-year high of 207p as investors and analysts said a deal could finally be on the cards. Shares in Verizon rose 4 per cent in New York.

As US growth slows, because most of the US population already own smartphones, and competition intensifies, Verizon is under pressure to find ways to keep growing.

Even assuming a $130bn price tag, with roughly half funded by debt, such a deal would increase Verizon’s pro forma earnings per share by 13 per cent in 2014, Nomura analyst Adam Ilkowitz said in a research note.