Verizon nears $130 billion wireless deal, to finance about $65 billion: sources – Reuters

A sign of Verizon Wireless is seen at its store in Westminster, Colorado April 26, 2009. REUTERS/Rick Wilking

A sign of Verizon Wireless is seen at its store in Westminster, Colorado April 26, 2009.

Credit: Reuters/Rick Wilking

Sat Aug 31, 2013 8:15pm EDT

(Reuters) – The boards of Verizon Communications and Vodafone Group Plc are expected to vote this weekend on a $ 130 billion transaction, funded by about $ 65 billion of debt, to give the U.S. telecom giant complete ownership of Verizon Wireless, people familiar with the matter said on Saturday.

A deal, which the sources said could be announced as soon as Monday, would cap Verizon’s decade-long effort to win full control of the No. 1 U.S. wireless provider.

At $ 130 billion, it would be the third largest corporate deal of all time and mark British telecom giant Vodafone’s exit from the large but mature U.S. market. Vodafone owns 45 percent of the Verizon Wireless joint venture that was formed in 2000.

The news of Verizon’s efforts was first reported by Reuters in April.

Verizon has tapped JPMorgan Chase & Co, Morgan Stanley, Barclays, and Bank of America Merrill Lynch to help raise the financing through a mix of bonds and bank loans, the sources said.

It plans to pay for another half of the purchase with its own stock.

The four banks are also advising Verizon, along with former Morgan Stanley banker Paul Taubman and Guggenheim Partners, the sources said.

Taubman, the former co-president of Morgan Stanley’s institutional securities business and a top dealmaker, left the Wall Street firm earlier this year after 27 years there.

Goldman Sachs and UBS are advising Vodafone, the sources said.

Verizon Communications and Vodafone declined to comment. Goldman Sachs declined comment as well. The other banks were not immediately available for comment.

Under the terms of the deal, Verizon Communications will buy Vodafone’s U.S. holding company, Vodafone Americas, that owns the Verizon Wireless stake and some other assets, the sources said.

Verizon will then keep the Verizon Wireless stake and sell European assets back to Vodafone, in a move that is expected to reduce Vodafone’s tax bill to around $ 5 billion, the sources said.

The deal marks the third-largest acquisition announcement in corporate history and British telecom giant Vodafone’s exit from the large but mature U.S. market.

Since Verizon already had operational control of the wireless company, the deal is not expected to create any changes for its customers but its additional financial firepower could help the company boost its service going forward.

The agreement marks the culmination of on-again, off-again discussions going as far back as 2004, when Vodafone made a run at AT&T Inc’s wireless business, which would have required Vodafone to sell out of Verizon Wireless.

Discussions between the two mobile giants resumed a few weeks ago, revolving around a sale for around $ 130 billion, sources have told Reuters.

Now, rising interest rates, rapidly intensifying competition and Verizon’s share price, which is off 12 percent in recent weeks, have lent urgency to get a deal done before raising money becomes too expensive.

Assuming a $ 130 billion price tag, total advisory fees for banks involved would be in the $ 200 million to $ 250 million range, according to Freeman estimates. Arrangement fees for a loan syndication could be around 0.2 percent to 0.4 percent of the proceeds raised or in a range of $ 125 million to 250 million range for a $ 60 billion syndication, the research firm estimated.

Verizon has made no secret of its desire to gain full ownership of the 13-year-old venture that’s still adding customers faster than its rivals and generating billions of dollars in free cash flow.

Verizon’s Lowell McAdam managed to get the deal done just two years into his reign as Chief Executive. His predecessor, Ivan Seidenberg, had long said it was a deal he would like to do.

Across the ocean, Vodafone Chief Executive Vittorio Colao had been biding his time, making it clear he would only sell the 45 percent stake at what he considered the right price.

The deal would leave Vodafone, the world’s second largest mobile operator, with assets in Europe and emerging markets such as India, Turkey and Africa and money to give back to shareholders.

(Reporting by Soyoung Kim and Michelle Sierra; additional reporting by Nicola Leske.; Editing by Paritosh Bansal and Sandra Maler)

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