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Vodafone shareholders will look for high US price

While Verizon is reported to be preparing $100bn bid for the rest of its wireless arm, Vodafone could ask $135bn


Published: 30 April, 2013

READ MORE: M&A | US | Verizon Wireless

Leading Vodafone investors will hold out for a high price for Verizon to buy the cellco out of their US joint venture. After reports that the US operator was preparing a $100bn offer for Vodafone's 45% stake in Verizon Wireless, Reuters says shareholders in the UK giant want at least $120bn.

Based on the poll of leading investors, the $100bn bid would be rejected and a figure between $120bn and $135bn would be considered more acceptable. Verizon, whose plan has not been confirmed, has long coveted full control of its successful wireless arm, and has indicated that, while it would prefer to achieve that with a friendly deal with Vodafone, it would be prepared to mount a hostile bid if necessary.

The Reuters survey also indicated that Vodafone backers would favor a full merger of the two carriers, even though Verizon appeared to rule out that option earlier this month. While shareholders have often urged successive Vodafone CEOs to exit the US, in order to cash in on the valuable joint venture, there seems to be growing recognition that this could generate short term cash but long term pain - leaving Vodafone exposed in its recession-struck European heartland, and reliant on accelerated investment in emerging economies to sustain growth.

The UK operator receives not just a share of Verizon Wireless's profits but also a dividend payment from its investment.

Another vital consideration will be the tax implications of a deal. If Vodafone would face a huge US capital gains tax bill for selling its stake - perhaps $38bn on a $100bn transaction - that would have to be factored into the price. Reuters says Verizon believes it has found a way to avoid most of that payment.

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