$40/share is in the ballpark IF IF IF a full VOD offer was made today as this is a solid premium to current price. BUT, if they wait until price rolls into the upper half of $30's then it will take near $47/share IMO. The rumor that was denied was 245B which even higher than $47.
Einhorn's thesis is VODs global operation without VZW had FCF with a 10X multiple giving those holdings 100B in minimum value. He also indicated the telecoms have been getting closer to a 12X FCF. His thesis is little value is reflected for VZW stake. Most analysts are indicating VZW stake owned by VOD is worth a minimum 120B but most indications are 130B with top range of 135B. That takeover rumor for 245B which was denied by VZ (but AT&T declined comment) is in line with a full 12X FCF for VOD's assets outside VZW and the 130B for VZW. The denied rumor would have to play out...... JMO, full takeover or nothing at all. No reason for VODs board to let go of VZW which is still growing profits - Check last Q. JMO, the 45% VZW stake will be worth about 150B in another year. The 130B is trailing.
If VOD keeps going up, its market value may be significantly above that of VZ's. So who's buying whom? Your $47 per share suggests VOD could be the buyer and end up controlling the combined entity. Perhaps VOD should team up with other foreign telecom firms and do a deal for VZ
Just doing simple back of the envelope math I come up with VZ paying $77.70 per share for VOD. VZ shares outstanding 2.86B * 45% = 1.287B shares owned by VOD. $100B offered by VZ for the 1.287B shares comes to $100B / 1.287B = $77.70/ share.
My math says load up the truck.
If I have made an error in my calculations please be kind enough to point them out to me.
VZ is looking to buy VOD's 45% ownership in VZW, NOT VZ. You have to back into the number with an assumption presented by many that VZ shares reflect most of the VZW value in VZ's 55% ownership in VZW. That is using your back of the envelope....
However, it is Einhorn's arbitrage argument that very little of the 45% VZW owned by VOD is reflected in VOD's current price if you place adequate value on VOD's other global assets. Einhorn indicated minimum 100B using FCF from those other assets. It was noted the multiple on FCF for those other assets was a 10X multiple used when the industry peer average is closer to 12X FCF. Recount that 245B rumor (for joint VZ and AT&T buying all of VOD in a full takeover) that was denied by VZ. Yes, that math adds up quick if the analslyst average for the 45% of VZW is about 130B . IF the rumor plays true THEN the current price is stupid cheap. Shares at a steep discount compared to the floated but denied rumor.
One poster stated AT&T has no reason to buy VOD's other assets (not the VZW stake which VZ wants) as Europe is junk etc etc..... Go look back in 2007. AT&T was sniffing VOD pretty hard. If you are ever going to buy, the time to buy is when blood is in the streets for those assets and finance costs to do the buyout are stupid, stupid cheap by historical standards. Never a better time to buyout such an undervalued beast.