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Vodafone's sale of ownership of joint venture to Verizon - Assignment Example

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Vodafone's sale of ownership of joint venture to Verizon

It is expected that if the deal goes through successfully then it will be one of the biggest in the history of Merger and Acquisition (Financial Times, 2013). History of Joint Venture In 2004, Vodafone was close to sell their shares to Verizon Wireless but their initiative did not materialize then primarily due to Vodafone’s failure to bid for AT&T Wireless. The Chief Executive officer of Vodafone at that time, Arun Sarin, stated that both Verizon and Vodafone were interested in bigger stakes in their joint venture and both were unwilling to forego majority ownership (Yahoo, 2013). Vodafone entered the United States market in the year 1999 through a series of deals that ultimately resulted in the formation of Verizon Wireless in the year 2000, with Verizon Communications holding majority 55% stake and Vodafone the rest. ...
Arun Sarin, who led Vodafone from 2003 to 2008, and the current CEO of Vodafone Vittorio Colao, has resisted the move by Verizon. The resistance of Vodafone was often made in the face of investor that demands for sale. Verizon Wireless became the largest telecom operator in the United States, a growing market that boasts higher prices and margins compared to Europe (BBC, 2013). The subsequent CEO of Vodafone Plc, Vittorio Colao, clearly stated that the company was still interested to sell the stake of Vodafone and dilute ownership but only when they get the right price in the sense that odds seeming favourable to owners of Vodafone Plc. Since then five years have gone by and it seems that Vodafone’s definition of the right time appears to be at present as evident from the official announcement made on the 29th of August 2013. The company has publicly announced that Vodafone Group Plc was officially negotiating with Verizon Communications to sell its stake in Verizon Wireless. In the past when Verizon initially offered to buyout Vodafone through Joint Venture, the company was valued at $ 100 billion. But the deal failed since Vodafone’s offer to sale its stake was valuing the entity at approximately a little over $130 billion. A popular article in The Wall Street Journal stated that Verizon Communications Inc. had lost a golden chance to get full control of one of the most active telecom companies in the world and its wireless joint venture. The company agreed to shell out billions more than it had to if the company had decided to buyout its partner in the past. As Verizon Wireless resumed dividend payouts, Vodafone has received $ 11.5 billion (? 7.34 billion) from the ...Show more
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Summary

Vodafone’s sale of ownership of joint venture to Verizon Table of Contents Introduction 3 Rationale behind JV for both Companies 5 Analysis of Stock returns 7 Impact of Stake Sell on Verizon’s Stock returns 7 Impact of Stake Sell on Vodafone Stock returns 10 Arrangements for Limiting UK Tax Implications 12 Discussion of Financing of Sale 13 Various Investment Options available to Vodafone 14 Conclusion 15 References 17 Bibliography 19 Introduction One of the world’s largest mobile phone companies, Vodafone Group Plc confirmed that it was interested to dilute ownership capital and it was in discussion with Verizon Communications for selling its operations in United States…
Vodafones sale of ownership of joint venture to Verizon
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