The United States' biggest mobile phone company has just agreed to acquire a proportion of the 'Verizon' business which is Verizon Wireless, currently owned by the U.K.'s Vodafone, which is 45% of Verizon.
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It has been portrayed as the third biggest buyout in history by much of the media. But when you look at the details of the deal, it raises questions as to why so much of the main stream media is getting so excited over it.
Verizon Wireless was formed when Vodafone merged with Bell Atlantic in1999. This is when the Verizon name first appeared.
To begin with, here are a few of the generally publicized details of the acquisition....
Much of the media is claiming the deal is worth $130 Billion in total.
According to the 'Washington Post'
Verizon will pay $58.9 billion in "cash", $60.2 billion in "stock" and $5 billion in "notes". Verizon also raised $61 billion in finance.
The Washington Post goes on to say that the buyout will, "give Verizon complete ownership over it's cellular company and marking the third largest such deal in U.S. history."
It also says, " The Verizon-Vodafone deal ends a 14 year partnership in the United States."
So......
.... Verizon is to buy a 45% stake of the 'Verizon ' business which is owned by Vodafone
....But in payment for this....Verizon will give Vodafone $60.2 Billion worth of 'stock' or shares in the new enlarged post buyout version of Verizon........(Stock means shares)..
This means....... Verizon will be giving back shares in Verizon to Vodafone. Almost half this deal is no more than a straight swap of shares...........In fact, part of the same company is actually being given straight back, to Vodafone............So calling it a straight swap of shares in two companies in this particular part of the deal would be making it more of a deal than it really is.......
Any way, this basically removes all most half this deal from the buyout spectrum (..if you was to bring this deal from the fanasy world of banking into the realms of reality where most of us live !....).
So...$60.2 Billion of this deal is no more than a swap of shares, and even that statement would be at a stretch of the imagination.
...Also in payment for this so called buyout or acquisition, Verizon will give Vodafone $5 billion in 'notes'.
Notes in the finance world are a type of bond......
These notes are investments. They are effectively debt. Or a bit like a large scale I.O.U. The holder receives regular interest payments on the debt, but the actual debt will not usually be paid until the maturity date, which may be ten years. However there is no guarantee that the original debt will ever be paid (or all the interest) back to the investor......
It basically means that Vodafone are lending Verizon $5 billion for the buyout !.....(or put it this way....this part of the deal means Verizon owe Vodafone $5 billion......Which needs interest paying until the 'maturity' date when the original $5 billion must be paid).
...These bonds could be put at risk if Verizon was to get into difficulties, by getting into vast amounts of debt, for example !
The final part of this deal is the one that raises most questions, in view of the fact Verizon pays out not a penny of cash in the two afore mentioned parts of the transaction.....
.....Investment banks are lending Verizon $61 billion to cover costs of this acquisition. The biggest part being the $58.9 billion 'in cash'.
This reference to 'cash', I think many people will find misleading.The kind of people who take a passing interest in the financial pages so they can just fantasize over how well their pension scheme or share investments might be doing. I think this wording is intended to mislead. It's often used with reference to these deals....But these references to 'cash' virtually always are actually referring to borrowed money. But you will notice that the financial media avoid talk about businesses getting into debt whilst share prices and asset values are at a vulnerable point......But as they are reporting what you are told is the business news, they should report it in full......Which in general, does not happen.
The average reader is likely to think that Verizon is swimming in cash and has this sort of money laying around. Unfortunately, this is clearly not true, because Verizon wouldn't need to borrow the $61 billion !
But the big question is;
If Verizon are not putting up any of the money for what is, we are told one of the biggest buyouts in history, how the hell are they getting finance of $61 billion???
It's difficult to answer that.....Maybe if you know the the advisers and people involved in this deal....You might like to know what the incentives of the banks providing this finance were...
Vodafone's advisers were led by Goldman Sachs deal maker, Karen Cook and UBS...Simon Shaw...These two alone are potentially going to collect £76 Million.
Verizon's advisers have been Bank of America, Guggenheim, Morgan Stanley and J P Morgan who will receive a total of £80 Million.
.........................These are fees for only 'advising'.........And you can bet your bottom dollar that the advice given by these advisers involves placing a business in rafts of unjustified debt !
If this buyout gets the go ahead, which they generally do, Barclays, Bank of America and JP Morgan Chase will be providing the finance.
As mentioned above, the financial media don't like to give details on current debts or debt about to be taken on by a business during a merger or buyout.......But as the BBC won't tell you....Verizon will be $120 billion in debt after the merger as they are already in a mass of debt.
To recover this money they are attempting to issue around $50 billion in bonds.
I won't be investing and neither should you.
I'm Out !
.
It has been portrayed as the third biggest buyout in history by much of the media. But when you look at the details of the deal, it raises questions as to why so much of the main stream media is getting so excited over it.Verizon Wireless was formed when Vodafone merged with Bell Atlantic in1999. This is when the Verizon name first appeared.
To begin with, here are a few of the generally publicized details of the acquisition....
Much of the media is claiming the deal is worth $130 Billion in total.
According to the 'Washington Post'
Verizon will pay $58.9 billion in "cash", $60.2 billion in "stock" and $5 billion in "notes". Verizon also raised $61 billion in finance.
The Washington Post goes on to say that the buyout will, "give Verizon complete ownership over it's cellular company and marking the third largest such deal in U.S. history."
It also says, " The Verizon-Vodafone deal ends a 14 year partnership in the United States."
So......
.... Verizon is to buy a 45% stake of the 'Verizon ' business which is owned by Vodafone
....But in payment for this....Verizon will give Vodafone $60.2 Billion worth of 'stock' or shares in the new enlarged post buyout version of Verizon........(Stock means shares)..
This means....... Verizon will be giving back shares in Verizon to Vodafone. Almost half this deal is no more than a straight swap of shares...........In fact, part of the same company is actually being given straight back, to Vodafone............So calling it a straight swap of shares in two companies in this particular part of the deal would be making it more of a deal than it really is.......
Any way, this basically removes all most half this deal from the buyout spectrum (..if you was to bring this deal from the fanasy world of banking into the realms of reality where most of us live !....).
So...$60.2 Billion of this deal is no more than a swap of shares, and even that statement would be at a stretch of the imagination.
...Also in payment for this so called buyout or acquisition, Verizon will give Vodafone $5 billion in 'notes'.
Notes in the finance world are a type of bond......
It basically means that Vodafone are lending Verizon $5 billion for the buyout !.....(or put it this way....this part of the deal means Verizon owe Vodafone $5 billion......Which needs interest paying until the 'maturity' date when the original $5 billion must be paid).
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...These bonds could be put at risk if Verizon was to get into difficulties, by getting into vast amounts of debt, for example !
The final part of this deal is the one that raises most questions, in view of the fact Verizon pays out not a penny of cash in the two afore mentioned parts of the transaction.....
.....Investment banks are lending Verizon $61 billion to cover costs of this acquisition. The biggest part being the $58.9 billion 'in cash'.
This reference to 'cash', I think many people will find misleading.The kind of people who take a passing interest in the financial pages so they can just fantasize over how well their pension scheme or share investments might be doing. I think this wording is intended to mislead. It's often used with reference to these deals....But these references to 'cash' virtually always are actually referring to borrowed money. But you will notice that the financial media avoid talk about businesses getting into debt whilst share prices and asset values are at a vulnerable point......But as they are reporting what you are told is the business news, they should report it in full......Which in general, does not happen.
The average reader is likely to think that Verizon is swimming in cash and has this sort of money laying around. Unfortunately, this is clearly not true, because Verizon wouldn't need to borrow the $61 billion !
But the big question is;
If Verizon are not putting up any of the money for what is, we are told one of the biggest buyouts in history, how the hell are they getting finance of $61 billion???
It's difficult to answer that.....Maybe if you know the the advisers and people involved in this deal....You might like to know what the incentives of the banks providing this finance were...
Vodafone's advisers were led by Goldman Sachs deal maker, Karen Cook and UBS...Simon Shaw...These two alone are potentially going to collect £76 Million.
Verizon's advisers have been Bank of America, Guggenheim, Morgan Stanley and J P Morgan who will receive a total of £80 Million.
.........................These are fees for only 'advising'.........And you can bet your bottom dollar that the advice given by these advisers involves placing a business in rafts of unjustified debt !
If this buyout gets the go ahead, which they generally do, Barclays, Bank of America and JP Morgan Chase will be providing the finance.
As mentioned above, the financial media don't like to give details on current debts or debt about to be taken on by a business during a merger or buyout.......But as the BBC won't tell you....Verizon will be $120 billion in debt after the merger as they are already in a mass of debt.
To recover this money they are attempting to issue around $50 billion in bonds.
I won't be investing and neither should you.
I'm Out !
This is all about Verizon mobile and its share. Thanks for sharing such an informative article.
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