Investors hit £54bn jackpot as Vodafone seals Verizon deal
Shareholders to scoop 71 per cent of proceeds from company’s £84bn sale
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Tuesday 03 September 2013
Vodafone last night declared it would be sending shareholders cheques totalling £54bn after sealing the giant sale of its stake in Verizon to its US joint venture partner.
But the chief executive, Vittorio Colao, declared he will not be embarking on a major takeover spree with the remaining proceeds of the £84bn sale.
Instead, the company will invest £6bn over the next three years in expanding 4G across its main European markets and upgrading its existing infrastructure under a plan called Project Spring.
Vodafone will receive $130bn for its 45 per cent stake in the US mobiles operation, including $58.9bn cash, $60.2bn in Verizon shares and $3.5bn in the form of Verizon’s 23 per cent stake in Vodafone’s Italian division.
Vodafone’s advisers, led by Goldman Sachs star deal maker and mother-of-six Karen Cook and UBS’ Simon Warshaw are likely to pick up fees of about £76m, according to analysts Freeman & Co. Verizon’s advisers, Guggenheim, JPMorgan and Morgan Stanley will receive about £80m. Further millions of dollars will be earned by Barclays, JPMorgan, Morgan Stanley and Bank of America for helping arrange and provide finance. A raft of lawyers in London and Wall Street will also be receiving huge fees. Investors will receive their proceeds from the sale in the form of new so-called “bonus shares” which they can then convert into cash and Verizon shares.
The deal still left some investors concerned about Vodafone’s new status as a far smaller business without the cashcow of fast growing US revenues. Sales growth at Verizon is running at 8.1 per cent compared with a 1.9 per cent revenue decline in the remaining business. Mr Colao moved to assuage those concerns by pledging to continue growing the dividend per share every year. He hailed a “very substantial return” to shareholders, saying pointedly it was a reward for the long-term patience of “savers and pension funds in the UK and the US”.
That looked like a clear shot at those investors who advised Vodafone to sell its Verizon stake five years ago for nearly half of last night’s price.
Mr Colao said: “This is for us a great opportunity to accelerate our Vodafone 2015 strategy which sees Vodafone becoming a data company providing unified services.”
The Italian also stressed the need to invest in infrastructure to keep up with customers’ demands to surf the web and watch video on the go, rather than just make calls and send texts.
“We expect the number of people using video on their smartphones to double in the next two years. We have already seen the level of data consumption on 4G running at double the level of 3G.”
But he did not rule out a takeover move, saying he would look “if opportunities arise in the market”. He has already made a string of small acquisitions in the last year.
Mr Colao dismissed suggestions that the decision to return as much as 71 per cent to shareholders meant he lacked strategic vision, saying the 29 per cent was still a substan- tial figure.
Meanwhile, the 51-year-old signalled that he had no intention of leaving the company, declaring that he was “super-confident” about what he called “the next chapter of Vodafone”.
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