Vodafone sale agreed true value over £3?

It seems like the deal has been struck at $135 billion and Vodafone has released some details. The total deal is valued at £1.12 per share. $60.2 Billion of this will be in shares and will be fully distributed to Vodafone shareholders. A further $23.9 billion will be distributed to shareholders as a special dividend. The rest of the proceeds will be used by Vodafone to reduce debt and for business investment. Vodafone seem very positive about the prospects for the remaining group and have announced that they will raise the dividend for next year by 8% to 11p. This seems amazing at the current share price of £2.13 after the Verizon stake that values the rest of the company at £1.01 with a dividend of 11p. That equated to a yield of 10.89%. I would suggest that if the dividend is reliable that they yield could be at least halved which would mean the value of the remaining stake would be doubled to £2.02. When you add the Verizon stake of £1.12 you could argue that Vodafone’s price should be £3.14 which is a significant premium to the current price.

Vodafone has announced a presentation will be held tomorrow so hopefully there will be more information then and if anything significant I will write another update.

 

3 Comments

  1. Trevor Bull says:

    Your valuation seems a little awry as only 83 billion of the proceeds are to be distributed to shareholders then the remaining 52 billion will be still held by the company as assets. This amount needs to be added back in to the post deal price to set against the dividend and therefore your future valuation would not be £3

    • adminn says:

      good point that reduces the value of the payout by about 40p so maybe £3 is a tad rich. However that was at a yield of over 5% which should be a bit lower. I’ll try and do more detailed valuations tomorrow after I’ve had a look at the presentation.

  2. adminn says:

    Actually having read the statement again I stick by my initial valuation. My wording might be slightly wrong though. The total deal is not vlaued at £1.12 per share, but that is the proportion that is being paid out to shareholders. The total deal is higher.

    At completion, Vodafone shareholders are expected to receive
    all the Verizon shares and US$23.9 billion of cash (the
    “Return of Value”) totalling US$84.0 billion (GBP54.3 billion),
    equivalent to 112p per share and representing 71% of the
    Net Proceeds.

    My valuation is therefore based on the payout of £1.12 to shareholders plus the value of the remaining shares based on a yield of around 5%.

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