Some Verizon investors OK with paying premium for Vodafone stake

Mon May 6, 2013 1:08am EDT
 
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By Sinead Carew and Kate Holton

NEW YORK/LONDON (Reuters) - Some shareholders of Verizon Communications Inc say they could be happy for the company to pay up to $130 billion for Vodafone Group Plc's stake in their U.S. wireless venture.

Reuters reported last week that Verizon had hired advisers to prepare a $100 billion cash-and-stock bid for Vodafone's 45 percent stake in Verizon Wireless, though several major Vodafone investors have said that figure is inadequate.

Two large shareholders in Verizon told Reuters they could be comfortable with paying 20 percent to 30 percent more to secure the No.1 U.S. mobile service provider, which generates 66 percent of Verizon's revenue and almost all of its profit.

"No way do I dream that $100 billion is going to get this deal done. It's just not going to happen," said Craig Leopold, portfolio manager at Columbia Management Investment advisors.

His firm, with $341 billion assets under management, is Verizon's 10th-largest shareholder with 22 million shares, according to the latest publicly available records.

"I think shareholders would be willing to accept a price as high as $130 billion because it would still be accretive to Verizon. But the preference would be a lower price like $120 billion," Leopold said.

Verizon declined to comment on what it might be willing to pay for full ownership of Verizon Wireless, and it is not clear if the company would be willing to go beyond $100 billion, which would already be the third-largest deal on record.

Spending so much on the business is not without risk for Verizon: there are few cost-savings to be had, and the mature U.S. mobile market is expected to become a much tougher place to compete in due to strengthening rivals and slowing growth, analysts said.   Continued...

 
Showgowers visit the Verizon booth on the first day of the Consumer Electronics Show (CES) in Las Vegas January 8, 2013. REUTERS/Rick Wilking