LONDON, September 2- Shares in Vodafone soared on Monday on speculation that the British mobile phone giant Vodafone will soon unveil a $130 billion deal to sell its US joint-venture stake to partner Verizon.
The company’s share price jumped 4.08 percent to 214.6 pence in early afternoon trading.
This was one day after Vodafone confirmed it was in “advanced” talks to sell its 45 percent holding in Verizon Wireless to Verizon Communications in a vast deal worth the equivalent of 98.5 billion euros or £84 billion.
London’s FTSE 100 index, on which the British firm is listed, was 1.82 percent higher at 6,529.82 points.
The blockbuster deal which would be one of the biggest transactions in global corporate history would allow Vodafone to bounce back from hefty losses, pay down debt, make new acquisitions and return money to shareholders, according to analysts.
It would also mark the group’s exit from the United States market.
The Financial Times, citing sources close to the situation, said that both sides had agreed in principle to the Verizon Wireless deal, while Verizon management would meet later on Monday to approve the purchase.
Both Verizon and Vodafone declined to comment further on the matter, when approached by AFP.
The gigantic buyout would be the second biggest merger and acquisition deal in global corporate history, according to data firm Dealogic. The world’s biggest M&A deal remains Vodafone’s purchase of Germany’s Mannesmann for $172 billion including debt, in 1999.
“Vodafone confirms that it is in advanced discussions with Verizon Communications Inc. regarding the disposal of Vodafone’s US group whose principal asset is its 45-percent interest in Verizon Wireless for US$130 billion,” the group said in a statement that was issued on Sunday and released to the London Stock Exchange on Monday.
“The consideration would substantially comprise a mixture of Verizon common stock and cash.
“There is no certainty that an agreement will be reached. A further announcement will be made as soon as practicable.”
The Verizon Wireless transaction would give US fixed line company Verizon full control after 13 years of shared ownership.
The Wall Street Journal reported that the deal would be announced on “Monday afternoon”, and cited a person close to the negotiations.
In May, Vodafone revealed that annual net profits had slumped by 90 percent after taking a vast impairment charge relating to poor business in debt-laden eurozone nations Italy and Spain.
Profit after taxation collapsed to £673 million in the group’s financial year to the end of March compared with £7.0 billion in 2011-2012.
Since then it has announced rising first quarter sales, as strength in emerging markets such as in Africa and Asia counters weakness in Europe.
In June, Vodafone launched a 7.7 billion euro cash offer for Kabel Deutschland, Germany’s biggest cable operator.
Atif Latif, director of trading at Guardian Stockbrokers in London, said the deal would likely spark an “increased dividend” for shareholders and create a cash pot to fund acquisitions in Europe.
“With this news we could see more acquisitions within Europe to give then a foothold back into markets where they have fallen behind in recent times,” Latif told AFP.
He added that $130 billion was at the top end of analysts’ estimates, and noted that the potential tax bill would likely be less than expected.
Jonathan Jackson, head of equities at brokerage Killik & Co, added that the deal would likely be announced before Wall Street reopened on Tuesday.
“We would expect the announcement over the next day or so, with the timing to be before the opening of the US market, which is closed today,” he said.
US financial markets remain closed on Monday for the Labor Day public holiday.