Verizon Agrees To Buy Vodafone's Stake In U.S. Wireless JV For $130 Bln

(RTTNews) - U.S. telecommunications giant Verizon Communications, Inc. (VZ) said Monday that it has agreed to buy British mobile phone company Vodafone Group Plc.'s (VOD, VOD.L) 45% stake in their Verizon Wireless joint venture in a $130 billion cash and stock deal that gives it full control of the largest and most profitable U.S. mobile phone carrier.

Under the terms of the deal, Verizon will pay Vodafone $58.9 billion in cash, financed with credit from J.P. Morgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc., Bank of America, N.A. and Barclays. The company also will issue $60.2 billion in stock to Vodafone shareholders.

In addition, Verizon will issue $5.0 billion in notes payable to Vodafone, and will sell its 23.1% minority stake in Vodafone Omnitel N.V. to Vodafone for $3.5 billion. The remaining $2.5 billion of the deal value will be a combination of other consideration.

The deal, which have been approved by both companies' boards of directors, is expected to close in the first quarter of 2014.

Lowell McAdam, Verizon chairman and CEO, said, "The timing was right to execute a transaction that benefits both companies and their shareholders. Today's announcement is a major milestone for Verizon, and we look forward to having full ownership of the industry leader in network performance, profitability and cash flow."

The $130 billion deal, which ends a 14-year partnership and marks Vodafone's exit from the U.S. mobile market, would be the second biggest all-time corporate deal, behind Vodafone's $172 billion acquisition of Mannesmann AG in 2000.

Verizon had been contemplating the buyout of the stake several times in the past decade, but pricing has been the biggest stumbling block along with the risk of raking up a huge tax bill nearing $10 billion.

The closest they came to reaching a deal was in 2011. Talks have also failed as recent as earlier this year when Verizon was looking to pay about $100 billion for the stake, but Vodafone was hoping a consideration in excess of $130 billion.

However, the talks accelerated since July due to the rising interest rates and growing competition in the U.S. wireless market, which saw several deals in recent months.

Sprint Corp., the third largest U.S. mobile phone company, was acquired in July by Japan's SoftBank Corp. In May, Deutsche Telekom AG's T-Mobile USA Inc., the fourth largest U.S. carrier, merged with MetroPCS Communications Inc. (PCS). In July, AT&T Inc. (T) agreed to buy prepaid-wireless provider Leap Wireless International Inc. (LEAP) for about $1.19 billion in cash.

The cash from the Verizon Wireless stake sale will allow Vodafone to make acquisitions in order to expand and diversify its business. In June, Vodafone agreed to buy, Kabel Deutschland Holding AG, Germany's largest cable company, for $10 billion. Vodafone also could become an acquisition target itself, with AT&T as one of its biggest suitors.

Verizon shares closed Friday's regular trading session at $47.38, down 44 cents, while Vodafone shares closed at $32.35, up 55 cents or 1.73%. In London, Vodafone shares closed Monday up 3.37% at 213.20 pence.