Nomura Securities Breaks Down Verizon and Vodafone Deal Chances (VZ,VOD)

Nomura Securities believes Verizon Communications Inc.(VZ) and Vodafone Group Plc(VOD) will amend their relationship this year.

Analyst Mike McCormack reported that he is positive that VZ and VOD will fix their relationship in 2013. McCormack commented, “we continue to see material accretion to Verizon by taking full control of Wireless. Assuming a 7.5x EV/EBITDA multiple, and funding the $111bn deal with 50% Verizon equity, we estimate Verizon’s 2013 EPS and FCF per share would rise 19% and 15%, respectively,” McCormack said. “Unwinding the JV in one step continues to seem daunting, with proforma leverage at 2.4x net debt/EBITDA, to say nothing of issuing $53bn in gross debt. The Vodafone tax liability continues to loom over the discussions. The press report references a tax-free transaction method, but Vodafone would still owe taxes when selling the Verizon shares it would receive. FY13E EPS at $2.77.”

Verizon shares were down 32 cents, or -0.67% during Wednesday morning trading, and have increased 22% in the past year. Vodafone shares were up 30 cents, or 1.11% during Wednesday morning trading, and have been mostly flat in the past year.

The Bottom Line
Shares of Verizon Communications Inc.(VZ) have a 4.37% yield, based on Wednesday morning’s price of $47.18.
Vodafone Group Plc(VOD) shares have a 3.76% yield, based on Wednesday morning’s price of $27.10.

Verizon Communications Inc.(VZ) and Vodafone Group Plc(VOD) are not recommended at this time, holding Dividend.com DARS™ Ratings of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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