Updated from 11:30 a.m. to reflect closing share prices and GAMCO Investors comments.
NEW YORK (
(VZ - Get Report)
late on Tuesday nixed speculation that it would buy all of British telecom
, in what would have amounted to the largest corporate merger of all-time.
While Verizon's disclosure leaves open the prospect of eventually buying Vodafone's 45% stake in Verizon Wireless, in a deal Citigroup analysts
could reach up to $135 billion, it does put to rest a merger arbitrage that hedge funder David Einhorn of
outlined in a January investor letter.
in an 8-K filing with the
Securities and Exchange Commission
that it has no intention of buying Vodafone in full, even if the carrier remains interested in taking control of a Verizon Wireless joint venture.
"Verizon Communications Inc. notes the recent press speculation regarding a potential merger with or purchase by Verizon of Vodafone," the company said in the
"As Verizon has said many times, it would be a willing purchaser of the 45% stake that Vodafone holds in Verizon Wireless. It does not, however, currently have any intention to merge with or make an offer for Vodafone, whether alone or in conjunction with others."
Verizon's disclosure curbs speculation by the
that it might team up with
(T - Get Report)
to buy and then split up Vodafone's assets.
According to the FT
, which cited "usually reliable people,"
bankers had been tasked with studying a potential deal that would give Vodafone an enterprise value of $245 billion, far above a $182 billion merger of
In a record merger, Verizon would look to take full ownership of Verizon Wireless, while AT&T would acquire Vodafone's extensive non-U.S. assets, the FT report said.
Such a scenario
might have pushed hedge funder and
(AAPL - Get Report)
activist David Einhorn further into the world of merger arbitrage, where competitors
Paulson & Co.
, Carl Icahn and
have shown proficiency.
"It wouldn't surprise us if Verizon decided to buy all of Vodafone to gain full ownership of Verizon Wireless. It could decide to become a global telecom leader or it could spin out parts of VOD that it's not interested in owning," wrote Einhorn, in the late January investor letter.
Unfortunately for Einhorn, Verizon's late Tuesday filing puts an end to speculation of a full merger and may indicate he miscalculated a
Einhorn said Greenlight has been adding to its holding of Vodafone given his expectation of a possible mega-merger.
According to SEC filings, Greenlight held 1.6 million Vodafone shares worth just under $50 million at current prices as of December 31, 2012.
(AAPL - Get Report)
are Greenlight's largest long stock investments, each valued at over $500 million at current prices, according to
data that references Dec., 31 SEC filings.
The removal of Verizon as a buyer of all of Vodafone may cause alarm for investors like Einhorn.
Bernstein Research and Citigroup analysts
noted in recent reports
that after a prospective Verizon Wireless stake sale, Vodafone would be left with a deteriorating European wireless business and an even less exciting land line presence.
Nevertheless, Citigroup calculates both companies could see their shares benefit from what could be a deal in excess of $100 billion.
For Vodafone, selling its stake in Verizon Wireless could improve the company's valuation multiples by between 17% and 46%, given the prospect of a deal price of between $105 billion and $135 billion, according to Citigroup.
"[We] still believe the most likely outcome is for Verizon to pursue a leveraged buyout of the wireless stake held by Vodafone, while we would be surprised if a joint bidding scenario emerged between Verizon and AT&T for Vodafone," wrote Citigroup analyst Michael Rollins on Tuesday.
Verizon is now likely searching for a tax efficient alternative to increase, if not, buy all of Verizon Wireless, said Mario Gabelli, head of GAMCO Investors, on
. The fund owns less than 1% of both Verizon and Vodafone shares, with stakes of about $163 million and $58 million, according to data compiled by
Some investors in Vodafone aren't optimistic about a deal for just Verizon Wireless.
John Hempton of hedge fund
wrote in a blog post on the fund's web site
that if Vodafone just sold Verizon Wireless and not the whole company, its entire board should be fired on the spot.
It is to be seen if Einhorn changes his tune on Vodafone.
Jonathan Gasthalter, a spokesperson for Greenlight Capital, didn't immediately return an e-mailed request for comment.
Vodafone shares were down over 4% Wednesday trading, to $28.10 on Verizon's disclosure. On Tuesday, Vodafone shares gained nearly 4%, closing at a seven-month high of $29.41 on the FT report.