Verizon, Vodafone reach $130 billion buyout agreement

Verizon will pay $130 billion to Vodafone in exchange for the carrier's 45 percent stake in joint venture Verizon Wireless.

In a statement, Verizon said it has entered a definitive agreement with U.K.-based Vodafone after back-and-forth talks to buy out the carrier took place over the last four years.

U.S.-based Verizon says that the 45 percent stake will be taken from Vodafone's hands for $130 billion, primarily consisting of cash and stock. The deal was unanimously approved by the boards of directors of Verizon and Vodafone over the weekend, and is expected to close in Q1 2014.

The buyout deal gives Verizon 100 percent ownership of the joint carrier.

The transaction requires Verizon to pay Vodafone $58.9 billion in cash. In order to fund the buyout deal, the carrier has entered into a $61bn Bridge Credit Agreement with J.P. Morgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc., Bank of America, N.A. and Barclays.

Vodafone shareholders will also receive Verizon common stock currently valued at approximately $60.2 billion. In addition, Verizon will issue $5bn in notes payable to Vodafone, and Verizon will sell its 23.1 percent minority stake in Vodafone Omnitel N.V. to Vodafone for $3.5 billion. The remaining $2.5 billion balance will be settled in undisclosed ways.

Lowell McAdam, Verizon chairman and CEO, said:

"Over the past 13 years, Verizon Wireless has been a key driver of our business strategy, and through our partnership with Vodafone, we have made Verizon Wireless into the premier wireless provider in the United States. The capabilities to wirelessly stream video and broadband in 4G LTE complement our other assets in fiber, global IP and cloud. These assets position us for the rapidly increasing customer demand for video, machine to machine and big data. We are confident of further growth in wireless, and our business in its entirety."

McAdam says the buyout will "enhance value across platforms and allow Verizon to operate more efficiently." and "will provide increased opportunities in the enterprise and consumer wireline markets."

Verizon Wireless, founded in 2000, reported $75.9 billion in operating revenues in 2012 and $39.5 billion in the first half of 2013. The company's operating income margin was 28.7 percent in 2012 and 32.6 percent in the first half of 2013. The joint venture is the largest U.S. wireless company currently in operation, and employs 73,400 members of staff.

Vittorio Colao, CEO of Vodafone said:

"This transaction allows both Vodafone and Verizon to execute on their long-term strategic objectives. Our two companies have had a long and successful partnership and have grown Verizon Wireless into a market leader with great momentum. We wish Lowell and the Verizon team continuing success over the years ahead."

Verizon also took the opportunity to announce a quarterly dividend of 53 cents per outstanding share for stockholders, an increase of 1.5 cents per share, or 2.9 percent, from the previous quarter. Annually, this increases Verizon's dividend 6 cents per share, from $2.06 to $2.12 per share.