Acquisitions by Verizon

B. Rajesh Kumar
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B. Rajesh Kumar: Institute of Management Technology

Chapter 4 in Wealth Creation in the World’s Largest Mergers and Acquisitions, 2019, pp 45-56 from Springer

Abstract: Abstract Verizon Communications acquired Verizon Wireless with the aim to create a new wireless business with a national footprint, single brand, and common digital technology. Verizon became the majority owner with 55% of Verizon Wireless and got the management control of the joint venture. Verizon Communications paid $130 billion for the acquisition of Vodafone Group Plc’s 45% indirect interest in Verizon Wireless. The deal was the third largest deal in the world after the Vodafone takeover of Germany’s Mannesmann and AOL’s acquisition of Time Warner in the year 2000. The deal also saw Verizon raising one of the largest ever financing packages valued at $67 billion. As per the terms of the deal, Verizon agreed to pay $58.9 billion in cash and additional $60.2 billion worth of its shares to Vodafone. The deal was for acquisition of 45% of Verizon Wireless. The deal catapulted Verizon with full ownership of the US wireless industry and industry leadership position in network performance, profitability, and cash flow. The cumulative return analysis for the 82-day period surrounding the announcement day shows that stock prices were on a downfall immediately surrounding the acquisition announcement and then gained momentum during the period +7 to +12 days after merger announcement. The average growth rate of revenues in the pre-acquisition period was 4.3% which decreased to 1.6% in the post-acquisition period. The average EBT margin increased from 9.96% to 16.71%. During 2015, Verizon acquired AOL to create unique and scaled digital media platforms for consumers, advertisers, and partners. The all-cash deal values AOL at $50 a share, a 23% premium over the company’s 3-month volume-weighted average price. The company acquired AOL as a source for new cash cow for its businesses. The cumulative returns for the 20-day period surrounding the AOL acquisition period were 0.55% for Verizon Communications stock. In July 2016, Verizon acquired Yahoo’s core internet business for $4.8 billion which was aimed to build an online advertising powerhouse to face competitors. The cumulative returns for target Yahoo stock for the 21-day window period were 12.59%. The 23-day window period cumulative returns for the acquirer Verizon Communications were − 3.7%.

Keywords: Verizon Wireless; Verizon Communications; Post-acquisition Period; Cumulative Return; Acquisition Announcement (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/978-3-030-02363-8_4

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