Verizon Communications Inc. (VZ)’s $130 billion buyout of Vodafone Group Plc (VOD)’s stake in their wireless venture will be positive for the pound as the windfall it offers stockholders may help support the recovery, Standard Bank said.
“At a time when monetary easing is running at full pelt and governments have little cash to handover in the form of lower taxes, any benefit stock owners can get from such cashbacks, could make the difference between sustaining recovery momentum or not,” Steve Barrow, the London-based head of Group-of-10 currency research at the bank, wrote in a report to clients. The transaction “could have positive repercussions” for the pound.
Verizon will pay Newbury, England-based Vodafone $58.9 billion in cash and issue $60.2 billion in stocks. Of that, $23.9 billion will be distributed to Vodafone shareholders in cash.
The pound has gained 0.7 percent against the dollar and 1 percent against the euro since the deal was announced this week. The U.K. currency was at $1.5607 and 84.43 pence per euro at 2:55 p.m. London time.
The deal will also benefit the currency as it “won’t be paid with cash held abroad and hence it could well be positive for sterling,” Barrow said.
Sterling has strengthened 6.3 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 3.9 percent and the dollar climbed 2.6 percent.
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