On Monday, September 2^nd, Verizon Communications Inc. (NYSE: VZ) announced that it had entered into an agreement with Vodafone Group Plc (NASDAQ: VOD), to acquire Vodafone’s 45 percent stake in Verizon Wireless for $130.0 billion.  Once the transaction closes, Verizon Communications will have 100% ownership of Verizon Wireless. 

 Valuation Analysis and Deal Metrics

Transaction Facts

• The acquisition will be financed through cash, Verizon common stock, and other items.
• $58.9 billion will be in the form of cash, $60.2 billion through stock, $5.0 billion in notes payable, $3.5 billion through the sale of Verizon’s 23.1 percent stake in Vodafone Omnitel N.V. to Vodafone, and the remaining $2.5 billion will come in the form of other items.
• Transaction is expected to close by Q1 2014.

Strategic Considerations

• Transaction provides further exposure to the growth of the U.S. wireless market.
• Provides Verizon Communications with full ownership and control of Verizon Wireless.
• Full ownership comes with no integration risk.
• Potential growth opportunities present with mobile.

 JSICA’s Take

• Compared to priced deals in the wireless industry since the middle of 2009, Verizon Communications paid higher multiples in the transaction.
• The average EV/TTM Revenue from mid-2009 to the end of 2013 was approximately 1.6x, compared to the Verizon-Vodafone transaction multiple of 3.7x.
• Since mid-2009 to the end of 2013, the average EV/TTM OIBDA was approximately 7.4x, which was 1.7x higher in the transaction.