NEW YORK – According to sources Verizon Communications (NYSE:VZ) has neared a $ 130 billion deal to buy out Vodafone’s (NASDAQ:VOD) 45 percent stake in the company. The deal would give Verizon complete control of their mobile phone unit. However, the initial reaction of some shareholders was of disbelief as the deal would saddle Verizon with a heavy debt burden at a moment that the company is completing capital-intensive network upgrades for 4G LTE service and beyond.
The boards of both companies will reportedly meet on Sunday in order to approach the deal, which would give Verizon full control over Verizon Wireless, America’s biggest cellphone service operator. While the deal is expected to be announced on Monday, representatives for both companies were unavailable for comment.
If approved, the deal would be the third-biggest takeover of all time, according to data from Thomson Reuters, trailing only Vodafone’s purchase of Mannesmann in 2000 and AOL‘s union with Time Warner the next year.
In recent years, Verizon and Vodafone have held talks to unwind their joint venture in Verizon Wireless, but those discussions had frequently fallen apart. In recent months, however, the two companies had managed to resolve many of their differences. According to sources, the deal would require over $ 60 billion in bonds and loans arranged by almost all of the big banks. While this would constitute a cash windfall for Vodafone, many are questioning whether the price is too high for Verizon as Vodafone was primarily a silent partner in the joint venture.
While the transaction will not directly affect the European market and as such will not require regulatory approval from the European Union, it will need to be reviewed by the Federal Communications Commission (FCC) and other Government regulators in the U.S. As such, the structure of the deal, which would essentially put the nation’s largest cell phone company in debt for years, might raise some eyebrows.
However, the timing could not have been better as the FCC is currently running at less than full strength as Presidential nominations have been held up in the Senate.