Shares in Vodafone (LSE: VOD) (NASDAQ: VOD.US) flew up over 9% this morning, following the confirmation that it is in discussions with Verizon Communications (NASDAQ: VZ.US) over the disposal of its US operations.
The stock smashed through the 200p price point that it’s been flirting with for months now, reaching 207p in early trade — heights last seen over 10 years ago.
Management stated that there was “no certainty that an agreement will be reached”; however, investors will be confident of a positive resolution following Verizon’s long courtship of Vodafone’s share in their joint-venture, Verizon Wireless — a deal that could be worth as much as $130bn.
The money gained from a sale could go towards further acquisitions after Vodafone recently completed the takeover of Kabel Deutschland, as chief executive Vittorio Colao looks to shift the company’s focus towards becoming a ‘one-stop shop’ encompassing mobile, broadband and television.
Verizon has repeatedly stated in public its desire to purchase Vodafone’s 45% stake, while rumours of a merger have persisted despite both camps’ attempts to douse those particular flames. One of the main stumbling blocks for a potential deal has been the heavy taxes that Vodafone might incur from a sale, though Verizon has oft disputed that this would be the case.
At the end of June, analysts at Deutsche Bank were setting a target price of 217p after upgrading Vodafone to a ‘buy’. With a tasty yield of around 5.4%, I’m more than happy to hold my shares and receive dividends while this scenario plays out.
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> Sam owns shares in Vodafone. The Motley Fool has recommended shares in Vodafone.
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