Report: Verizon to pay whopping $130 billion for rest of Verizon Wireless
Verizon (NYSE: VZ) is close to inking a deal to buy Vodafone's 45 percent stake in Verizon Wireless for a whopping $130 billion, according to sources consulted by Bloomberg. Neither of the companies would confirm the report.
The deal would end a decade-long partnership between the U.S. and U.K. carriers, and would be the largest acquisition in more than a decade, the newswire noted.
Verizon is in talks with a number of banks to raise a total of $60 billion, according to Bloomberg's sources. Apparently, the firm would finance the rest through internal resources, such as stock.
"Verizon wants to be completely in control of its own destiny. This is fundamentally a recognition that wireless is the future," Jan Dawson, chief telecommunications analyst with the New York office of London-based Ovum, told the newswire.
As part of the deal, Verizon is expected to sell its 23 percent stake in Vodafone Italia, which could be worth more than $5 billion, back to Vodafone, the newswire noted.
Vodafone is likely to use proceeds from the sale of its Verizon wireless stake to shore up its position in the European wireless market, which has been hurt by the region's debt crisis.
According to analysis by Miriam Gottfried of the Wall Street Journal, if Verizon adds at least $50 billion in new debt to finance the deal, the firm would have a hefty net debt of 2.2 times 2014 earnings before interest, taxes, depreciation and amortization.
In addition, if the $130 billion figure is accurate, Verizon would be paying 8.5 times EBITDA for the rest of Verizon Wireless. "Owning Verizon Wireless will mean much higher cash flows for Verizon. But if margins fall and growth falters, $130 billion could look like a very high price indeed," Gottfried concludes.