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The Deal: Verizon Gets Full Control of Wireless Unit in $130 Billion Deal

By Jonathan Braude and Andrew Bulkeley

Phone giant Verizon Communications Inc. (VZ - Get Report) late Monday finally confirmed the details of its hard-fought $130 billion cash-and-stock agreement to buy a 45% stake in Verizon Wireless from it U.K. partner Vodafone Group PLC (VOD) in the biggest deal since Vodafone bought Germany's Mannesmann AG for ¿180 billion ($238.8 billion) in 2000.

In an announcement after the London market closed on Monday, New York-based Verizon said it will pay Vodafone $58.9 billion in cash, funded, as expected, with a $61 billion bridge loan from JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), Bank of America (BAC) and Barclays PLC (BCS).

The American company said it will also issue common stock, currently valued at about $60.2 billion to be distributed to Vodafone shareholders, as well as $5 billion in loan notes payable to Vodafone. It will also sell its 23.1% minority stake of Vodafone's Italian business, Vodafone Italia, or Vodafone Omnitel NV, to the British company for $3.5 billion. It said it will finance the remaining $2.5 billion through a "combination of other considerations." Vodafone clarified in a separate statement that this includes "the assumption by Verizon of Vodafone net liabilities relating to the U.S. group."

Vodafone, of Newbury, England, said the price represented an "attractive" enterprise value of 9.4 times trailing 12 month Ebitda and 13.2 times trailing operating free cash flow.

The agreement ends years of speculation about the venture, which started in 1999 with Vodafone's entry into the U.S. market.

Vodafone and Verizon ended up partners after Vodafone outbid Bell Atlantic Corp. in the 1999 auction of Airtouch Communications Inc. Fearing the competition, Bell Atlantic then agreed to merge with Vodafone's newly acquired U.S. provider. Eventually the cellular division of GTE Corp. was folded in and the provider was renamed Verizon Wireless, with Verizon holding 55%.

Financing and tax questions had proved obstacles to previous efforts to restructure the ownership.

Verizon said the transaction is dependent on regulatory approvals as well as shareholder votes at both companies and is not expected to close until the first quarter of 2014. To account for market fluctuations in the interim, Verizon said the share price would be subject to a collar arrangement with a floor price of $47 and a cap price of $51 that will determine the maximum and minimum number of shares to be issued to Vodafone shareholders on closing. On this basis, a maximum of 1,280 million Verizon shares and a minimum of 1,179 million Verizon shares will be payable, Vodafone said.
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