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Verizon/Vodafone $130B deal announced, Moody's cuts Verizon's rating

  • Verizon Communications' (VZ) $130B purchase of Vodafone's (VOD) stake in Verizon Wireless is official.
  • VOD will get $58.9B in cash, $60.2B in VZ stock (which will go to VOD shareholders), and $11B from other transactions.
  • The deal will be immediately accretive to the tune of 10% for VZ. (PR)
  • VOD will return $23.9B of the cash to shareholders and the company says it will "increase the total FY14 dividend per share by 8%." (PR)
  • Moody's cut Verizon's long-term debt rating by one notch to Baa1 following the announcement.
Comments (40)
  • Dan Naumov
    , contributor
    Comments (324) | Send Message
     
    Bought VOD shares on London open @ 214p a share, sounds like I got a good deal after all :)
    2 Sep 2013, 01:27 PM Reply Like
  • bobchh
    , contributor
    Comments (2) | Send Message
     
    will anyone attempt a guess, as to how many shares of vz, and how much cash each adr will receive?

     

    bobchh@aol.com
    2 Sep 2013, 01:55 PM Reply Like
  • Energysystems
    , contributor
    Comments (953) | Send Message
     
    From a napkin calculation, it should be roughly 1 VZ share for every 3 VOD shares owned, and 4.88$ special dividend(23.9B divided by total outstanding VOD shares 4.89B)
    2 Sep 2013, 02:01 PM Reply Like
  • jayridescarbon
    , contributor
    Comments (259) | Send Message
     
    Hi ES,

     

    Do you mean 1 VZ share per VOD ADR (10 shares). It would be hard to believe it would be per share. If that were the case, my 591 shares of VOD (about 19 k) would be receiving about 197 shares of VZ (about 9k). That seems at little too good to be true. If it is per ADR, then that would be about 19 shares of VZ.

     

    Thanks,

     

    Jay
    2 Sep 2013, 02:21 PM Reply Like
  • Dan Naumov
    , contributor
    Comments (324) | Send Message
     
    All the important details of the deal implementation are here: http://bit.ly/1cz4tPp
    2 Sep 2013, 02:29 PM Reply Like
  • Energysystems
    , contributor
    Comments (953) | Send Message
     
    Yeah, I'm referring to the ADR. I always have to try and remind myself of the 10 shares it represents on the London exchange(I'm US based).
    2 Sep 2013, 02:32 PM Reply Like
  • jayridescarbon
    , contributor
    Comments (259) | Send Message
     
    Thanks
    2 Sep 2013, 02:40 PM Reply Like
  • Derek A. Barrett
    , contributor
    Comments (3534) | Send Message
     
    BOOM

     

    Looks we are getting paid, nice work VOD, patience is a virtue
    2 Sep 2013, 02:12 PM Reply Like
  • Grant Dossetto
    , contributor
    Comments (139) | Send Message
     
    In a sane world, Verizon would lose it's investment grade debt rating for this deal. It isn't like they don't already have a fair bit of debt, $60B in bridge financing is crazy.

     

    Some people like the skyscraper index. This deal might be a much better example of ringing the bell at the top. I hope VOD shareholders take their payment in cash. I wouldn't want to be an shareholder or a junior debtholder of VZ for a while.
    2 Sep 2013, 02:49 PM Reply Like
  • King Rat
    , contributor
    Comments (575) | Send Message
     
    VOD wins no matter what micro or macro economic forces hit. VOD gets cash+debt in return for equity and if anything happens to VZ, the equity will be worthless anyway whereas the debt may become new equity (meaning they get cash+equity in exchange for equity)

     

    VZ only wins under the following scenarios:
    Interest rates rise significantly post-settlement
    VZ rises in value significantly post-settlement
    Inflation to cover the debt rises significantly post-settlement

     

    The bid rose 30% from earlier this year when it was $100billion. I can't help but feel that VZ got completely outmaneuvered by VOD here, yet the headline from another article reads: "For Verizon advisers, huge payoff..." Ouch, VZ. Everybody took advantage of you but at least you have bragging rights.

     

    In the mean time, hopefully they'll be able to pay off the interest of all that debt they'll have to incur.
    2 Sep 2013, 04:03 PM Reply Like
  • Vinofilo
    , contributor
    Comments (109) | Send Message
     
    I thought VZ was downgraded today.
    2 Sep 2013, 05:02 PM Reply Like
  • gallerytom
    , contributor
    Comment (1) | Send Message
     
    I have been with voda since racal days .Am correct is assuming I will get 1 eur 20 cent per vodafone share ,if so as the young people say happy days.
    2 Sep 2013, 04:01 PM Reply Like
  • pepperdo
    , contributor
    Comment (1) | Send Message
     
    Hi. Can someone help me understand please.

     

    I own 4200 shares of VOD. Will my share price change or would I own both VZ stock and VOD stock? Can you help me estimate my gain? Looks like a great windfall but I never had a situation like this. Thanks. Best to all.
    2 Sep 2013, 04:01 PM Reply Like
  • rw1270
    , contributor
    Comments (377) | Send Message
     
    When a huge dividend/distribution is announced, the market is trying to "price it in" right now, and it seems at the moment it is doing poor job. Why that is, beats me, but that's a different discussion. Perhaps we see automatic sell on the news reflexes. Then once the distribution is is realized, on ex-date (day after last day of eligibility for such distribution) you expect a large drop in the share price, as for that moment the value of this big distribution is no longer part of the company's valuation. For example, the company is $30/share and announces $10/share distribution/dividend/... On ex-date the share price would likely drop to about $20. In a sense, portion cash of the business is no longer its part, so the price has to reflect the remainder. There may be pennies differences, as market would fluctuate pricing with or without that distribution. I hope it makes sense. In other words, if you sit through this deal with your shares and you see them dropping by large amount, don't panic. In another month or two, you'll see cash coming in and Verizon shares will be posted in your account. You are free to do with the proceeds what you like, including reinvesting and keeping the Verizon shares. The total should more-less equal the value of the company prior that ex-date. If you are in London, seems there will be a dedicated facility to sell Verizon shares for small shareholders (VZ is not listed there). In other words, they'll buy shares from you over the counter at some fixed daily price.

     

    Hope that makes sense to you.
    3 Sep 2013, 08:47 AM Reply Like
  • Matt Hylland
    , contributor
    Comments (45) | Send Message
     
    So here is my back of the envelope calculation:
    23.9 b in cash spread among 4.89 b shares is $4.88 per share.
    VZ is issuing 60.2 b in shares between a price of $47 and $51 depending...
    At $47 that means 1.28 b shares issued.
    At $51 that means 1.18b shares issued.

     

    Which means at $47, 1 share of VOD gets you .2615 shares of VZ, or 1 VZ share for each 3.82 VOD shares you own.

     

    At $57, 1 share of VOD gets you .2413 shares of VZ, or 1 VZ share for each 4.14 VOD shares you own.

     

    Anyone agree?
    2 Sep 2013, 04:34 PM Reply Like
  • Energysystems
    , contributor
    Comments (953) | Send Message
     
    You're spot on. I was hoping that a lower price per VZ share would be established for the deal since it was such a large increase in the share count. But, not so. It's a windfall for VOD shareholders.
    2 Sep 2013, 04:39 PM Reply Like
  • Vinofilo
    , contributor
    Comments (109) | Send Message
     
    So in this case, is it advisable to DRIP the special dividend or to take it as cash? Is it even possible to DRIP it?
    2 Sep 2013, 04:55 PM Reply Like
  • jayridescarbon
    , contributor
    Comments (259) | Send Message
     
    Again, hate to be nit picky, but can we define it for US ADR holders? Do you mean with VZ at 47 per share, 1 VOD ADR (10 shares) get .26 shares of VZ or 1 actual US VOD share gets .26 shares of VZ.

     

    Also, with the possible special dividend, does that equate to 4.88 per US ADR (10 shares) or 4.88 for each share.
    2 Sep 2013, 05:01 PM Reply Like
  • Energysystems
    , contributor
    Comments (953) | Send Message
     
    Vino's calculations are based on US ADR, as well as the calculation for the special dividend.
    2 Sep 2013, 05:11 PM Reply Like
  • Energysystems
    , contributor
    Comments (953) | Send Message
     
    I believe you'll have a choice, to either drip the special dividend or take it as cash. I'll be calling my broker tomorrow and will know for sure at that point.
    2 Sep 2013, 05:11 PM Reply Like
  • amateur_investor
    , contributor
    Comments (169) | Send Message
     
    VOD announced they will be distributing ~$84 billion of the proceeds to their shareholders. Considering as of the close on Friday VOD's market cap was $158 billion, this equates to ~$17 per share.

     

    I would the think VOD would be trading in the low 40's tomorrow and gradually move up as we get closer to the deal being finalized. Once VOD goes ex-dividend, then the shares will trade back in the upper 20's.

     

    Just my two cents.
    2 Sep 2013, 07:48 PM Reply Like
  • Dividend Growth Machine
    , contributor
    Comments (1450) | Send Message
     
    I get similar numbers. My calculations indicate $4.97 in cash and $12.50 in VZ shares per VOD ADR share (in other words, 1 VZ share at $47 for every 3.76 VOD ADR shares). I discuss how I arrived at those numbers on my blog:

     

    http://bit.ly/1fvgkOd
    2 Sep 2013, 07:54 PM Reply Like
  • rw1270
    , contributor
    Comments (377) | Send Message
     
    I usually DRIP, but I'm thinking to take cash this time. The reason is that if too many people DRIP such a huge distribution, there will be a price spike. Even regular "final" dividend (arond $1.00/ADR), has a history of spiking the price. Imagine what $5/ADR will do if same number of people DRIP.
    3 Sep 2013, 08:51 AM Reply Like
  • onlyapps
    , contributor
    Comments (71) | Send Message
     
    Would someone venture to guess what this VOD/VZ transaction will do to employees 401K that are made up of VZ stock over the next few years? And, the new debt..how might that affect legacy obligations over the next 5 yrs.?
    2 Sep 2013, 06:02 PM Reply Like
  • RS055
    , contributor
    Comments (1939) | Send Message
     
    I wonder... If VOD had simply spun off its VZ holdings. Then as a VOD investor - you could have sold half of the VZ that you got in the spinoff... I wonder if you would be in the same spot as a passive VOD investor - compared to the Deal as it is !! Of course the investment bankers would not have earned some $100 mil ++ fees, and howza bout dem lawyers and such?Not to forget the Executives . Plus the tax cut to the various governments.
    So - forget it - I guess it is all good - as long as folks are getting paid!
    2 Sep 2013, 06:52 PM Reply Like
  • amateur_investor
    , contributor
    Comments (169) | Send Message
     
    RS055,

     

    I'm not sure about that. The market valued Verizon which included the 55% stake in VZW @ $135 billion prior to the announcement. It seems VZ is paying quite a premium for VZW. It seems VZ has valued VZW @ around $285 billion if you consider them paying $130 billion for the 45% stake.

     

    IMHO it seems like a great deal for VOD shareholders since management plans to distribute ~$84 billion of the proceeds.

     

    Best regards.
    2 Sep 2013, 07:34 PM Reply Like
  • Deja Vu
    , contributor
    Comments (1158) | Send Message
     
    so for the VOD ADR, what is a fair open for it tomorrow and a fair close price? someone, anyone? I've seen estimates from $36 to $47
    2 Sep 2013, 10:50 PM Reply Like
  • jayridescarbon
    , contributor
    Comments (259) | Send Message
     
    Deja Vu.

     

    I asked the same question on another article a short time ago. I don't know why anyone would sell a share for less than 45 to 50 dollars a share when a current share at 32 will bring about 17 to 18 dollars in cash and VZ shares early next year.
    2 Sep 2013, 11:06 PM Reply Like
  • Matt Hylland
    , contributor
    Comments (45) | Send Message
     
    VOD shares traded in London were only up about 3% Monday. That translates to a US ADR price of about $33.30. Why they were only up 3% and not more is a mystery to me, as I agree with some other commenters here that it could easily be $40.
    2 Sep 2013, 11:15 PM Reply Like
  • jayridescarbon
    , contributor
    Comments (259) | Send Message
     
    Hey Matt,

     

    I think the details of the deal were announced here around midday which would have made it after the close in London, right?
    2 Sep 2013, 11:23 PM Reply Like
  • Energysystems
    , contributor
    Comments (953) | Send Message
     
    Yep, the deal was official after the close. I expect a big pop on Tuesday.
    2 Sep 2013, 11:29 PM Reply Like
  • Matt Hylland
    , contributor
    Comments (45) | Send Message
     
    Makes sense, thanks
    2 Sep 2013, 11:32 PM Reply Like
  • rw1270
    , contributor
    Comments (377) | Send Message
     
    Seems it went down. I really have no idea, what's in heads of market movers. If this is not good enough, what is?
    3 Sep 2013, 08:52 AM Reply Like
  • steve4466
    , contributor
    Comments (91) | Send Message
     
    I calculate ADR is worth 34-37 on very conservative assumption that 'rump' will trade on 6.0% dividend, after 2015 dividend is reduced by one-third to one-quarter from its 2014 value - to reflect the amount of dividend that was included in the VZ component of its pre-split capitalisation. That is very conservative though, you could argue higher than 37 for takeover attraction or as a recovering euro telco to trade at lower dividend yield than 6.0%.
    3 Sep 2013, 10:13 AM Reply Like
  • BTinSF
    , contributor
    Comments (129) | Send Message
     
    Let me add my calculations to all the others and ask for appropriate criticism:

     

    1 VOD ADR = 10 ordinary shares

     

    According to the Financial Times, holders of VOD ordinary shares will get 112p per share in total. That's 11.20 UK pounds per ADR or $17.36 at the current exchange rate. As part of that, they will get 0.026 VZ shares per ordinary share or 0.26 VZ shares per ADR at the present value of VZ ($47.38). That's equivalent to $12.32. So, ADR owners will get roughly $5.04 in cash and $12.32 in VZ shares.

     

    Meanwhile, there are persistent rumors AT&T would like to buy VOD after the deal. That should levitate the shares even more.
    3 Sep 2013, 03:25 AM Reply Like
  • jayridescarbon
    , contributor
    Comments (259) | Send Message
     
    VOD down in London and pre open here. Wait, what??
    3 Sep 2013, 07:46 AM Reply Like
  • Dan Naumov
    , contributor
    Comments (324) | Send Message
     
    According to several sites "some investors were dissapointed by the payout". Don't know whether to laugh or cry :)
    3 Sep 2013, 08:16 AM Reply Like
  • rw1270
    , contributor
    Comments (377) | Send Message
     
    One feature of of public stock market is that word "enough" is simply removed from vocabulary and banished.
    3 Sep 2013, 08:54 AM Reply Like
  • Energysystems
    , contributor
    Comments (953) | Send Message
     
    Those investors are insane. I would've been completely satisfied if just the VZ shares were passed to us VOD shareholders. But to get a near 24B special dividend? If anything, I thought it was a bit excessive. Still, VOD has a war chest after that huge reward to shareholders.
    3 Sep 2013, 10:09 AM Reply Like
  • Vinofilo
    , contributor
    Comments (109) | Send Message
     
    I wonder what the record date will be for both.
    3 Sep 2013, 12:09 PM Reply Like
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