Verizon hasn’t put an offer on the table, but that hasn’t stopped some of Vodafone’s biggest investors from saying a $100 billion takeover price is too small. They want $120 billion, gosh darn it!
According to a Reuters story this weekend, six institutional investors have protested the $100 billion price tag that Reuters floated last Wednesday. Both of these numbers followed a wack-a-doo rumor from early April that AT&T and Verizon would jointly team up to buy out Vodafone’s 45 percent stake in Verzion in a deal valued at $245 billion. That rumor was reported by the Financial Times’ Alphaville blog. And Verizon denied it.
For those watching at home, it’s possible that you think the media has lost its ever-loving mind, or that somewhere a bored investment banker is sitting back in his ergonomic chair, fingering his Ferragamo tie and cackling with glee. But in general, when these sorts of rumors start hitting the press, it’s part of an aggressive campaign of leaks, where a company (or bank) can float some rumors in hopes of sparking a deal.
Reuters reporters aren’t getting phone calls from Verizon’s board members (although it has happened!); I think they are getting calls from bankers who want to make a deal happen. And it’s a crazy deal with crazy regulatory and possibly tax burdens, but it’s also the right sort of crazy. Verizon and Vodafone’s shared stake in Verizon Wireless has irked both companies for years.
Vodafone needs cash for investments in growing markets and Verizon has been stingy with its dividends. But, as the latest Verizon dividend payment shows, if investors can get Verizon to part with the dollars, Vodafone rewards its shareholders with cash. Meanwhile, Verizon would love to own its network outright if Vodafone would just sell back that stake. But so far Vodafone won’t. Thus, the leaks.
Of course, the two companies have broached the subject of a merger, much like unhappy spouses broach the topic of divorce. But the logistics of the deal — Verizon probably doesn’t want to pay what Vodafone thinks the stake is worth, and each side has shareholders who are, like children, unhappy with a split — have made it too much to think about.
Hence the posturing via blogs and wire services. This is a way of testing the shareholders and perhaps regulators to get a feel for what the deal might entail. This may not come from the companies as a serious play, but rather from bankers who see the fees associated with the deal and understand the lay of the land at both companies. If they can warm up the companies via the media, then they might get a chance at a pretty lucrative deal. That is what bankers get paid to do.
So grab your popcorn, and sit back to enjoy the negotiations between Verizon, Vodafone and whatever financial institution or institutions are selling this sideshow. I suppose it beats wondering how carriers will compensate for the lost of messaging revenue.