Windfall for 400,000 Irish investors as Vodafone to give back $84bn as 45% stake sold back to Verizon

Shareholders will get combination of cash and Verizon shares after $130bn deal

In June, Vodafone acquired Germany’s Kabel Deutschland and speculation has now shifted as to whether Liberty Global – owner of UPC Ireland – could be among its next targets

In June, Vodafone acquired Germany’s Kabel Deutschland and speculation has now shifted as to whether Liberty Global – owner of UPC Ireland – could be among its next targets

 


About 400,000 Irish shareholders in British telecoms firm Vodafone are set to share in a windfall of $84 billion (€63 billion) following the sale of the group’s US business.

A shareholder with £5,000 €5,900) in Vodafone shares could earn as much as £2,600 (€3,067) in a combination of Verizon shares and cash, as the UK group will redistribute about 71 per cent of its gains from the deal.

After months of speculation, Vodafone said last night that it had sold its 45 per cent stake in Verizon Wireless for $130 billion back to Verizon. It is the third-largest corporate transaction in history, with Vodafone having also been involved in the largest, its acquisition of Germany’s Mannesmann in 1999.

Vodafone will get $58.9 billion in cash, $60.2 billion in Verizon stock and an additional $11 billion from smaller transactions that will take the total deal value to $130 billion. Of this, Verizon’s stock of approximately $60.2 billion will be distributed to Vodafone shareholders, as well as $23.9 billion in cash, bringing the total return for shareholders up to $84 billion.

Many Irish investors in Vodafone originally held Eircom shares before the sale of its Eircell business to Vodafone back in late 2000. While they have enjoyed a rocky ride with the telecoms group, the stock has soared in recent weeks, closing up yesterday by 3.4 per cent at £2.13, its highest level since 2001. While the stock has gone through various permutations since the Eircom flotation in 1999 at €3.90, it is understood that Vodafone is now approaching an equivalent value, of £2.20. The latest windfall will help soften the blow even further.

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 US 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 per cent, excluding any one-time adjustments.

“This has been a highly productive partnership in a business with excellent momentum,” Vittorio Colao, Vodafone’s chief executive, said. The joint venture was formed in 1999, when Verizon was known as Bell Atlantic.

While Vodafone will lose one of its best assets, 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 tough regulation.

In June, Vodafone acquired Germany’s Kabel Deutschland, and speculation has now shifted as to whether Liberty Global – owner of UPC Ireland – could be among its next targets. The UK firm said it planned to plough £6 billion (€7 billion) into improving its mobile and broadband networks over the next three financial years.

It said the investment programme, dubbed Project Spring, would help it boost growth to underpin its increasing dividend payments to shareholders.

Vodafone will pay tax on the deal of $5 billion in the US, but said the UK was not a “relevant jurisdiction” because its US arm is owned by a Dutch holding company. Vodafone recently hit the headlines when it used an Irish subsidiary, which employed no staff between 2002 and 2007, to collect hundreds of millions of pounds a year in royalty payments from operating companies and joint ventures around the world. – (Additional reporting: Reuters/Bloomberg)