Certainly Is A LOT Of Money Out There
Verizon? Vodaphone? $160 Billion? $78.5 Billion?
It may be that I live a very sheltered life because I’d never heard of Vodaphone prior to right now. And the only comprehension I have of those amounts of money is that they are numbers I have no comprehension of…
Larry Dignan at Between The Lines tells us that Vodaphone says they’re “Not Buying Verizon.”
“The Financial Times reports that Vodafone is pondering a $160 billion acquisition of Verizon. Vodafone says yeah right. But a weak dollar could make the deal possible.”
Citing a statement by Vodaphone - “Vodafone notes press speculation that it is considering a possible offer for Verizon Communications. Vodafone wishes to make it clear that it has no plans to make such an offer” - Larry points out that “Currently, Verizon Wireless is a joint venture between Verizon and Vodafone” which is something else I didn’t know. (There’s a lot I don’t know, smile)
“Vodafone Group Plc is the world’s leading mobile telecommunications company, with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States through the Company’s subsidiary undertakings, joint ventures, associated undertakings and investments.
The Group’s mobile subsidiaries operate under the brand name ‘Vodafone’. In the United States the Group’s associated undertaking operates as Verizon Wireless.
The Company’s ordinary shares are listed on the London Stock Exchange and the Company’s American Depositary Shares (’ADSs’) are listed on the New York Stock Exchange. The Company had a total market capitalisation of approximately £72 billion at 26 May 2006.”
Larry also mentions;
“The audacious plan has been discussed in recent weeks as Vodafone has considered whether to trigger a little-known put option it holds over part of its stake in Verizon Wireless — a move that, accompanied by an asset revaluation at the American company, could allow it to suck up to $20bn out of Verizon and distribute this to its shareholders.”
Definition - Put Option:
“A put option (sometimes simply called a “put”) is a financial contract between two parties, the buyer and the writer (seller) of the option. The put allows the buyer the right but not the obligation to sell a commodity or financial instrument (the underlying instrument) to the writer (seller) of the option at a certain time for a certain price (the strike price). The writer (seller) has the obligation to purchase the underlying asset at that strike price, if the buyer exercises the option.”
Of course, the kicker to all of this information is “Shockingly, the biggest argument for the Vodafone-Verizon deal was left out: The weak dollar. Sure, $160 billion is a huge amount, but it’s not nearly as big as it used to be–if you’re paying in British Pounds - given the dollar only buys .49 of a pound that $160 billion price tag may not be all bad. If Vodafone is paying in pounds the Verizon deal is only $78.5 billion.”
IPhone anyone???
Tags: leveraged-buyout, Verizon-Wireless, Vodaphone, weak-dollarRelated Stories
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