WSJ: Vodafone Won't Use Sale Proceeds for Major Acquisitions
Telecom Giant Will Return $84 Billion to Shareholders and Pay Down Debt
Vodafone Group may have just put itself on the market.
The European telecom giant plans to turn the bulk of the proceeds from the sale of its biggest asset over to shareholders rather than go on a major shopping spree, raising the prospect that the slimmed-down company could itself become an acquisition target...
But in a move that surprised analysts and investors, the U.K.-based company said it plans to turn over to shareholders cash and Verizon stock of about $84 billion.
Leftover cash—about $30 billion after taxes—will help Vodafone fund a three-year, £6 billion ($9.3 billion) program to speed up its deployment of high-speed wireless and fixed networks, with the rest left on the balance sheet to reduce Vodafone's net debt, which stood at $38.78 billion on June 30.
Smaller acquisitions might be considered for some fixed-line operators, but the company said they aren't necessary...
But his self-avowed discipline raises questions about the company's long-term viability as a stand-alone player, as it invests in its own businesses rather than spending big to expand, analysts say.
"Vodafone is backing their organic prospects to revive some growth," said James Britton, an analyst at Nomura. "But they have preened themselves for a potential bid. AT&T will be licking its lips."
In recent conversations with analysts and investors, AT&T Inc. executives, including Chief Executive Randall Stephenson, have laid out an interest in acquiring companies that would allow them to offer wireless service across Europe, people who heard the presentations said....
So if they are going to return 84 billion to shareholders, and there are 4.89 billion shares outstanding, then are they not saying they will return $17 a share in cash and VZ shares? Which means that buyers of VOD make money on this stock until it hits around $49 a share, no?
worst case is maybe $40 of value... that happens if VZ stock price slumps to 40 or below by deal closing, below the $47 collar so the total distribution to shareholders is worth closer to $14 or $15, and the post-deal VOD sells for $25 or $26. Best case is maybe $50 of value, with VZ selling for $52-55 at deal close, and VOD stub valued at $32 or so. If this really is only going to pop a buck or so tomorrow--it only closed up 3% in Europe today--it's a steal.