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%.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Baysinger T (2016) http://www.adweek.com/digital/verizon-deal-yahoo-and-aol-are-finally-together-172658/. Accessed 6 July 2017
Businesswire (2016) http://www.businesswire.com/news/home/20160401005508/en/Frontier-Communications-Completes-Acquisition-Verizon-Wireline-Operations. Accessed 4 July 2017
Colton K, Carew S (2013) Verizon-Vodafone agree to $130 billion wireless deal. http://www.reuters.com/article/us-vodafone-verizon/verizon-vodafone-agree-to-130-billion-wireless-deal-idUSBRE97S08C20130903. Accessed 2 July 2017
Fitchard K (2015) The real reason why Verizon bought AOL. http://fortune.com/2015/06/24/verizon-gains-aol/. Accessed 6 July 2017
Michael J, Scott M (2013) Verizon seals long sought $130 billion deal to own wireless unit https://dealbook.nytimes.com/2013/09/02/verizon-reaches-130-billion-deal-to-buy-out-vodafones-wireless-stake/?mcubz=3. Accessed 3 July 2017
Rooney B (2015) Verizon buys AOL for $4.4 billion. http://money.cnn.com/2015/05/12/investing/verizon-buys-aol/index.html. Accessed 6 July 2017
Shields M and Gryta T (2015) https://www.wsj.com/articles/verizon-to-buy-aol-for-4-4-billion-1431428458. Accessed 5 July 2017
Varettoni B (2014) Verizon completes acquisition of Vodafone’s 45 per cent indirect interest in Verizon wireless. http://www.verizon.com/about/news/verizon-completes-acquisition-vodafones-45-percent-indirect-interest-verizon-wireless/. Accessed 2 July 2017
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Nature Switzerland AG
About this chapter
Cite this chapter
Kumar, B.R. (2019). Acquisitions by Verizon. In: Wealth Creation in the World’s Largest Mergers and Acquisitions. Management for Professionals. Springer, Cham. https://doi.org/10.1007/978-3-030-02363-8_4
Download citation
DOI: https://doi.org/10.1007/978-3-030-02363-8_4
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-02362-1
Online ISBN: 978-3-030-02363-8
eBook Packages: Business and ManagementBusiness and Management (R0)