Vodafone shareholders set to receive 72p in Verizon shares and 30p in cash for each share owned

19th February 2014

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Vodafone says that each investor will receive 72 pence in Verizon shares and 30 pence in cash for each share owned. The deal means investors will receive 0.026 shares in Verizon Communications for each Vodafone share they own as part of the $130 billion sale of the group’s stake in Verizon Wireless. The telecoms group says shares will be consolidated on February 24 at the ratio of 6 new shares for 11 existing shares following the closure of the deal on Friday.

Verizon has been trying to buy Vodafone out of the joint venture – formed in 2000 – since at least 2007 when Vodafone rejected a $35bn offer for the group. Analyst Nomura has shifted it target price for Vodafone from 750p to 755p and restated its buy recommendation.

The broker consensus on Vodafone on Digital Look is for a buy splitting between ten who rate it a strong buy, 3 a buy, 14 neutral and 2 a strong sell.

Share trading will commence on Monday 24th February and cash allocated on Wednesday, 5th March.

Richard Hunter, head of equities at Hargreaves Lansdown says: “Despite some trading issues in parts of Europe and India, and the fiercely competitive nature of the industry, the long-term prospects for both the Vodafone and Verizon businesses look strong.

“Investors will be receive their shares on Monday and be able to trade Vodafone from 8.00 am and Verizon from 2.30 pm. Under the terms of the deal, the cash allocation will not be settled until the 5th March.” Hargreaves Lansdown has also summarised the market consensus about both shares.

Verizon

The deal acquiring Vodafone’s 45% stake in Verizon Wireless is seen to be strategically transformative, whilst its announcement of the further purchase of Intel’s pay TV start up should enhance its video over high speed connections presence.

Despite concerns over the intensity of competition in the sector and the increasing significance of smartphones, the current market consensus for the shares is a buy.

Vodafone

The current market consensus is that the shares are a buy. The potential war chest Vodafone will be acquiring following the Verizon disposal (it is returning only an estimated £54bn of the £84bn stake) could position it for further acquisitions such as the recently completed Kabel Deutschland deal. Indeed recent reports suggest Vodafone is eyeing up Spanish broadband operator Ono for a deal worth £7bn. There have also been rumours that Vodafone itself could become a bid target following the demerger.

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