Vodafone in talks to sell stake in Verizon Wireless

cashbackproblems

After the selloff the share price will probably drop to around 90-110p + you will have cash or shares from Verizon, they could consolidate the shares to bring the price back up to £2. With pressures in Europe it depends how the board invests this extra money but i cant see the price going above 215p+ over the next few years. Verizon was generating tons of money and gave everyone confidence that Vodaphone had a backup/safety net..now it will be fighting on its own.

IronWolf

Bear in mind that there is an army of arbitrage traders at banks that specialise in situations like this looking for profits that can be made from distributions and the sum of parts. Retail investors don't really stand a chance of making much money from situations like this unless there is a risk on the table they haven't considered.

lvader

IronWolf wrote: »

Bear in mind that there is an army of arbitrage traders at banks that specialise in situations like this looking for profits that can be made from distributions and the sum of parts.

They will still be trying to work this out, plus thet won't want their money tied up for months. Unless you are happy to hold both companies in the end it's too early for a short term speculative buy.

sabretoothtigger

They did that with BP. Its quoted in USA and London, they were playing one off the other depending on the time of day, oil price etc.
Anything that can move alot is interest to arb traders I think
http://en.wikipedia.org/wiki/Hedge_fund#Relative_value

LCTM did that (they went broke) I wouldnt presume I cant do it because professionals are already there (I used to think this then I see how often they are wrong), you can say that about every stock.
They have supercomputers wizzing away on trades as we speak and yet opportunity remains for the little guy but I agree with Ivader, prepare to be an investor more then pulling off a fast buck.

Voda is probably still worth having, but I'd say the same of BP and its hardly a gleaming example

planteria

lvader wrote: »

Unless you are happy to hold both companies...

i don't see why not, at this stage.:)

planteria

sabretoothtigger wrote: »

Voda is probably still worth having, but I'd say the same of BP and its hardly a gleaming example

i went in & out of BP twice, and did really well on the way out of the crisis. on reflection, i probably should have just held them since. holding both Vodafone and BP seems a reasonable idea to me.:)

atush

Just as well, as I do lol.

planteria

from HL:

"Vodafone cashes in

Richard Hunter | 3 September 2013

After months of speculation, Vodafone announced yesterday it will sell its 45% stake in Verizon Wireless for £84 billion.

£54 billion will be returned to Vodafone shareholders through a mixture of cash and Verizon shares equating to around 112p per share (Vodafone's current share price is 208.3p), broken down as 32p in cash, plus 80p in Verizon shares.

In addition, Vodafone intends to consolidate share holdings on what is expected to be roughly a two-for-one basis.

Example
1,000 shares in Vodafone is currently worth £2,083. Under the terms of the announcement an investor holding 1,000 shares could expect to receive:
Cash of 32p per share = £320
26 shares in Verizon (based on Verizon's latest price of $47.34 and assuming an exchange rate of 1.55 = £30.54 per share) = £800 (rounded up)
500 'new' Vodafone shares

What are shareholders' options?
The structure of the deal presents Vodafone shareholders with a number of options.

If investors do not wish to continue holding Vodafone shares following the announcement, they can sell them in the normal way.

For those wishing to continue, this raises two questions - what to do with the cash proceeds and what to do with the newly acquired Verizon shares?

Cash
The choices are to take the cash or reinvest into Vodafone shares (or indeed Verizon shares).
For investment into Vodafone, the current market consensus is that the shares are a buy.
Vodafone is well-established and the disposal of the Verizon stake should result in greater focus on the European operation, which is struggling with economic constraints and fierce competition. Vodafone's acquisition of Kabel Deutschland is a clear statement of intent within this market.

Elsewhere, Vodafone has not ruled out acquisitions in emerging markets, which currently account for 30% of its business and where the demographics are arguably developing in its favour.

The announcement has been well received and I believe prospects for Vodafone remain promising. The share price has seen a 17% rise over the last year, as against 12% for the FTSE 100, and the current yield of 4.7% is supportive at least until the New Year when the deal completes.

The consolidation makes the dividend yield subject to an interesting development. Vodafone announced an 8% increase in the 2014 full-year dividend to 11p and plans to grow it thereafter. In theory, if the consolidation is on a two-for-one basis as expected, the dividend yield could continue to be similar to the one currently seen. Once the terms of the consolidation are known the new yield can be calculated and re-evaluated.

There are concerns Vodafone will now be lacking the cash Verizon Wireless provided, and will no longer have exposure to the US market. The company has decided, however, that now is the right time to take profits on Verizon Wireless in order to concentrate on mobile and unified communication services in both mature and emerging markets. The main thrust of this strategy is to be achieved through 'Project Spring', of which more details will be provided in due course, but which will involve "additional organic investments in 4G, 3G, fibre and broadband, enterprise services and improved customer experience across all of our markets."

The newly acquired Verizon stake
Verizon Communications may not be well known to UK investors, but it is a major player in the US with a market value of $136 billion (£88 billion) prior to the deal.

The deal reiterates Verizon's confidence in prospects in its home market, and the company benefits in a number of ways. It will no longer need to consult Vodafone on strategic decisions, which may give it a more nimble, competitive edge, plus it will free up cash as it no longer needs to pay Vodafone a dividend, which in turn should boost quarterly earnings.

Furthermore, the increasing willingness of banks to lend, coupled with the appetite of institutional investors for high-quality corporate bonds, means raising funds for the acquisition is not considered to be a hurdle. This does not come without risk, however – Verizon has significantly increased its debt, which in turn could reduce some of its ability to generate free cash. This has led to a small downgrade in its credit outlook from Moody's.

The current market consensus on Wall Street is that Verizon shares are a buy.

What is still unknown
These are our initial thoughts on the details as provided by both parties. The deal is expected to be completed in the first quarter of 2014, preceded by a shareholder circular due for release in December 2013. Once these documents are released we will be able to answer:
When the money and shares will be passed to shareholders?
How Vodafone will return the money and Verizon shares to investors? – This could have tax implications. A 'special dividend' will be subject to income tax.
The terms of the consolidation - how many shares will investors have in Vodafone going forward?"

planteria

anyone any further thoughts re. the changes with Vodafone??

markwilkinson

This explains the options, quite simply, for those wondering what to do:

http://www.telegraph.co.uk/finance/personalfinance/investing/shares/10288456/Vodafone-how-can-shareholders-decide-what-to-do.html