Vodafone Drops as Verizon Says It’s Not Considering Bid

Vodafone Group Plc shares fell from a five-year high after Verizon Communications Inc. said it isn’t considering a bid, denying a report that it was discussing a joint offer for the U.K. carrier with AT&T Inc.

Verizon said yesterday it doesn’t have any intention “to merge with or make an offer for Vodafone, whether alone or in conjunction with others.”

Vodafone fell 3.1 percent in London today after climbing as much as 6.1 percent yesterday when the Financial Times blog reported that AT&T and Verizon were considering a joint offer. Verizon reiterated its interest to buy Newbury, England-based Vodafone’s 45 percent stake in the companies’ U.S. mobile venture, Verizon Wireless.

“There never was a bid,” Ottavio Adorisio, an analyst at Societe Generale in London, said in an interview. “As far as Verizon is concerned, they have had for the last 10 years one target -- it’s to get Vodafone out at a decent price.” Adorisio recommends selling Vodafone shares.

A joint bid with AT&T could allow Verizon to seize full control of Verizon Wireless, while letting its U.S. rival scoop up the remaining Vodafone assets in Europe. AT&T wireless head Ralph de la Vega said in an interview in February that the company would consider opportunities to expand internationally.

Representatives from Vodafone and AT&T declined to comment on takeover scenarios or Verizon’s statement.

Vodafone dropped 5.85 pence to 186.15 pence in London. Verizon fell 1 percent to $48.99 at the close in New York.

Seeking Control

Bloomberg News reported last month that New York-based Verizon had considered a full merger with Vodafone as recently as December, though talks faltered because of disagreements over leadership and the location of the new headquarters.

Verizon is now focused instead on gaining full control of Verizon Wireless, its most valuable asset, people familiar with the situation said in March. The venture was formed in 1999 when Vodafone and Bell Atlantic Corp., which became Verizon Communications, combined their mobile units. Vodafone’s stake is worth about $115 billion, according to analysts’ estimates.

“As Verizon has said many times, it would be a willing purchaser of the 45 percent stake that Vodafone holds in Verizon Wireless,” Verizon said in the statement.

Verizon Communications, as the 55 percent partner, controls the payments that the wireless venture distributes to the partners, leaving Vodafone with an uneven income from the U.S. The cash is becoming increasingly important to Vodafone as its European operations falter, Adorisio said.

Takeover Rules

Vodafone Chief Executive Officer Vittorio Colao has said he wants to gain assets that would allow the company to offer bundled Internet, mobile and landline phone services across the continent. The company had internal discussions about an acquisition of German cable company Kabel Deutschland Holding AG before abandoning the plan, people familiar with the plans said in February.

Under U.K. takeover rules, Verizon will have to wait six months after yesterday’s statement to make an offer to buy Vodafone or shares representing more than 30 percent of voting rights in the company. The rules are designed to protect shareholders in companies that are takeover targets and subject to information leaks that affect the stock price.

Exceptions to this rule include scenarios where Vodafone’s board authorizes a takeover, a third party makes an offer or there is a “material” change in the company’s circumstances.

Previous Efforts

Earlier efforts at winding down the Verizon Wireless partnership haven’t been fruitful. In 2004, former Verizon Communications CEO Ivan Seidenberg suggested that Vodafone and Verizon Communications swap a stake in Vodafone’s Italian business for Vodafone’s holding in the U.S. In 2006, analysts called for Vodafone to take advantage of an option to sell $20 billion of its holding in Verizon Wireless to Verizon Communications. The company let that option expire in 2007.

It came up again in 2009, when Colao, on the job for just over a year, said at a conference in Barcelona that he intended to “solve” Vodafone’s lack of control over Verizon Wireless and that he would consider selling the stake or merging with Verizon Communications.

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