A Verizon Communications Inc. (VZ) shareholder sued to stop its acquisition of Vodafone Group Plc (VOD)’s 45 percent stake in Verizon Wireless for $130 billion in what may be the first investor class action stemming from the deal.
Natalie Gordon alleged in her complaint that the agreement is “insufficient and inadequate” to shareholders of New York-based Verizon, which Gordon says overpaid for the stake. She seeks group status for the lawsuit on behalf of all affected shareholders.
“Verizon shareholders are being shortchanged and their investment in Verizon will be diminished and diluted as a result of the stock purchase agreement,” Gordon said in the complaint, filed yesterday in New York state Supreme Court in Manhattan.
Verizon Communications earlier this week agreed to buy Vodafone’s stake in Verizon Wireless, seeking full control of the most-profitable U.S. mobile-phone carrier in the biggest acquisition in more than a decade.
“We believe this lawsuit is entirely without merit and Verizon intends to defend itself vigorously,” Randal S. Milch, executive vice president and general counsel for the company, said in a statement.
The deal, sought by Verizon since at least 2004, implies a total value for Verizon Wireless of almost $290 billion -- larger than the market capitalization of Google Inc. or the gross domestic product of Singapore.
The wireless unit produces $21.8 billion in operating income a year, all of which can now go into Verizon’s coffers so it can fund more network investments to take on mounting competition. Vodafone can exit a business whose dividends and operations it didn’t control.
In March, Bloomberg News reported that Verizon was eager to take full control of the wireless unit this year after having weighed options including a full merger of the two companies.
The companies said they expect the acquisition to close in the first quarter of 2014. If completed at $130 billion, almost Verizon’s entire market value, the deal would be the biggest since Vodafone’s acquisition of Mannesmann AG in 2000.
Guggenheim Securities LLC, JPMorgan Chase & Co. (JPM), Morgan Stanley (MS) and Paul J. Taubman served as Verizon’s lead financial advisers. Wachtell, Lipton, Rosen & Katz and Macfarlanes LLP handled transaction counsel, while Debevoise & Plimpton LLP advised the company on its debt financing. Vodafone’s board was advised by Goldman Sachs Group Inc. UBS AG and Simpson Thacher & Bartlett LLP.
Verizon will pay Vodafone $58.9 billion in cash, financed with credit from JPMorgan, Bank of America Corp., Barclays Plc (BARC) and Morgan Stanley. The company also will issue $60.2 billion in stock to Vodafone shareholders.
Gordon seeks to stop the transaction “unless and until the company adopts and implements a procedure or process to obtain a merger agreement providing fair terms for shareholders.” The shareholder also seeks unspecified damages.
The case is Gordon v. Verizon Communications Inc., 653084/2013, New York State Supreme Court, New York County (Manhattan).
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