Re: Eh? Selling shares in Verizon in exchange for shares in Verizon
In the nineties, Vodafone bought Airtel in the US by using a corporate vehicle based in the Netherlands. Airtel effectively became 'Vodafone USA', then merged its assets with Bell Atlantic's wireless assets, forming Verizon Wireless. Because Bell Atlantic (now called Verizon) also bought GTE and merged it into Verizon Wireless, it was the larger partner, and Vodafone plc, through its Dutch corporate vehicle 'Vodafone USA', ended up with a 45% stake in Verizon Wireless.
Now, Vodafone's Dutch vehicle is proposing to sell this 45% stake back to Verizon, for $60 billion in cash (raised through several banks), another $60 billion in shares, and $10 billion in other securities (probably bonds). Verizon's current valuation is $184 billion, which means that after the transaction's completion, the $60 billion that Vodafone's Dutch vehicle gets in shares give it a 30% shareholding in Verizon themselves. That pretty much shows that Verizon Wireless is a major value driver for Verizon themselves.
And the reason why it's tax neutral for Vodafone is simple. The Dutch vehicle owns 'Vodafone USA'. 'Vodafone USA' has one major asset, its 45% stake in Verizon Wireless. So now that that stake is sold, 'Vodafone USA' ends up with $130 billion in cash and shares, minus $5 billion to the US taxman because of a deferred tax liability from the Airtel days (remember that Airtel was bought by the Dutch vehicle and effectively became 'Vodafone USA'). The cash stays where it is, the shares stay where they are until such time that Vodafone plc decides what to do with it. Because the transaction occurs between two US entities, the UK taxman does not get involved.
According to Richard Peston, the idea is to return much of the cash to investors, which means that for UK investors, the tax liability falls to them for their share of the pot as a capital gain, Vodafone themselves don't have a tax liability.