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Could Verizon and Vodafone be getting closer to ending their joint ownership of Verizon’s wireless business?
Reuters reported Wednesday that Verizon has hired banking and legal advisers to put together a $100 billion bid for Vodafone’s share of Verizon Wireless, the No. 1 wireless carrier in the U.S., and that Verizon’s board is expected to discuss details of a potential buyout next week, at a meeting prior to its annual shareholder meeting.
Unnamed sources told the news agency that Verizon is confident it can raise about $50 billion from bank financing and that the rest of the bid would be made up of Verizon stock. Verizon hopes to start talks for a “friendly deal” but is prepared to go public with the bid if Vodafone resists, Reuters added, citing one of its sources.
Verizon has for years sought to buy out Vodafone’s stake in Verizon Wireless, which is the fastest-growing and most profitable part of Verizon. Vodafone, for its part, has agitated for a better return from the asset.
In March, Bloomberg reported that the two companies have been carrying on informal discussions that include talk of a buyout as well as of a possible merger between Verizon and Vodafone. And earlier this month, the Financial Times reported that Verizon was teaming with AT&T to buy Vodafone, a report Verizon later contradicted in a regulatory filing.
Regarding its report today, Reuters said Verizon had declined to comment but had directed the news agency to the statement made in the aforementioned filing: “As Verizon has said many times, it would be a willing purchaser of the 45 percent stake that Vodafone holds in Verizon Wireless.”
Reuters’ sources said a bid was by no means certain and that Vodafone might not bite if an offer was made. They also said any deal would likely need to minimize the tax burden on Vodafone:
One of the main sticking points to a deal so far has been the perception that Vodafone could incur a tax bill of around $20 billion if it sells its holding, meaning Verizon would have to pay a high price to make it worthwhile for the British company.
But the sources said any deal would be structured in such a way that the eventual tax bill would likely be $5 billion or less. Verizon Chief Financial Officer Fran Shammo said last week that he was extremely confident it could purchase the Vodafone stake without any major tax implications. He did not elaborate on how this would work.
Correction, April 25 at 10:26 a.m. PT: The original version of this story contained a typo that misstated the amount of cash involved in the potential bid. Sources told Reuters that Verizon is confident it could raise about $50 billion from bank financing.
