Vodafone is to sell its 45% stake in Verizon Wireless to Verizon for $130bn in cash and stock, subject to regulatory approvals, comprising $61.4bn in cash and assumption of net liabilities, $60.2bn in stock (within a $47-51 per share collar), $5bn in a VZ loan note and $3.5bn ascribed to VZ’s 23.1% stake in Vodafone Italy. As the WSJ reports [11], this is the second-largest ever behind another Vodafone deal - the $172 billion acquisition of Mannesmann AG in 1999 (which is somewhat ironic in its largesse and timing).
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The cash component - nearly twice the state budget of Verizon Wireless's New Jersey home - is by far the largest amount of cash ever deployed in an acquisition and will be financed by 4 $15 billion 'bridge loans', "until more permanent financing can be found over the next 12 to 18 months." Was there a Jefferies highly confident letter involved in this one wonders? Of course, we assume investors will be over-subscribing to the higher-leveraged firm's bonds (just like they did with AAPL but 4 times bigger!)
In the meantime, this is the US telecom industry spaghetti chart.
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and it seems credit markets are nervous of all this extra leverage already... with VZNEW pushing towards record wide spreads...
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Via WSJ, [11]
Verizon Communications Inc. has agreed to pay $130 billion for Vodafone Group PLC's stake in their U.S. joint venture...
The acquisition of Vodafone's 45% stake in Verizon Wireless is the second-largest ever behind another Vodafone deal - the $172 billion acquisition of Mannesmann AG in 1999
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Under the terms, Verizon is paying $60.2 billion in stock and $58.9 billion in cash, with the remaining $10 billion made up of other consideration including Verizon's 23% stake in Vodafone's Italian unit and $5 billion in notes payable to Vodafone.
The cash component - nearly twice the state budget of Verizon Wireless's New Jersey home - is by far the largest amount of cash ever deployed in an acquisition, according to Dealogic, topping the more than $50 billion InBev paid to acquire U.S. brewer Anheuser-Busch in 2008.
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Despite its scale, the deal is likely to have a negligible impact on Verizon's 100 million subscribers and involve little if any scrutiny from antitrust regulators, because Verizon already controls the venture.
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Lining up about $60 billion in debt financing shouldn't be a problem for Verizon. The four financing banks — J.P. Morgan Chase & Co., Morgan Stanley, Bank of America Corp. and Barclays PLC — will provide a bridge loan until more permanent financing can be found over the next 12 to 18 months. Each bank will cover an equal portion of the loan, people familiar with the matter said.
Around $20 billion to $30 billion of the total could later be covered by bonds, one of the people said. Bonds could make up the biggest piece of the overall financing, another of the people said.
A bond sale of that size would easily beat out Apple Inc.'s $17 billion bond sale in April, which as of now is the largest corporate bond offering on record. Bankers at the time said Apple received more than $50 billion in orders for the debt,
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Some investors have already expressed interest in the Verizon bonds should they materialize. Some investors expect the new Verizon bonds would be sold at lower prices compared to existing Verizon bonds, offering buyers a chance for additional yield when interest rates remain near historic lows. Taking on all that debt could lead to Verizon's downgrade by credit-rating firms, but it is still expected to remain in investment grade territory.