Tomahawk, WI 9/10/2013 (BasicsMedia) – Verizon Communications Inc. (NYSE:VZ) recently announced its decision to purchase 45% stake in Verizon Wireless that is presently owned by Vodafone Group Plc. (NASDAQ:VOD). It is worth noting that Verizon already owns the remaining 55% stake in the carrier which has around 100 million subscribers. The company agreed to pay $59 billion in cash and around $60 billion in the form of stock and other assets to Vodafone for the buyout.

Investors unhappy

Shareholders of Verizon claim that the company is attempting to overpay to acquire the remaining stake in the joint venture of the wireless carrier. Natalie Gordon, a shareholder of the company filed a lawsuit in New York just days after the buyout deal was announced and claims that the purchase price for the acquisition is too high. The investor also claims that this acquisition would prove to shortchange the shareholders of Verizon.

This lawsuit also claims that the heavy decline in share prices of VZ since the day of announcement of the buyout deal stands to prove that the investors are not happy with the purchase price fixed up for the wireless carrier. The lawsuit aims to force Verizon to present better terms of acquisition and purchase price for the deal with Vodafone so as to be beneficial to the shareholders or to cancel the purchase of the remaining 45% stake in the joint venture.

Analysts’ opinion

It is widely considered among the analysts in The Wall Street that Verizon is indeed overpaying to succeed in its buyout attempt for the joint venture. Analysts at Moody’s Investor Service downgraded the rating of the firm to Baa1, which is in fact a low investment grade. The report notes that this downgrading of the stock was done due to the plans of the company to increase its debt by huge value of $67 billion, which is more than doubling the current debt load of the company.

Verizon continues to process the deal

In another move, the company along with its financial team appears to be busily involved in the process of finding buyers for an initial $20 billion in bonds so as to provide for the $130 billion purchase deal of the joint venture. It is further reported that the company is discussing seriously over the idea of offering billions of its bonds with longer maturity periods of up to 100 years.

All such rapid moves taken up by Verizon prove that the company is determined to take over the wireless carrier, primarily owing to its strong potential for growth prospects in the near future. However, things are highly uncertain on whether Verizon would be able to successfully finance this buyout deal without adding huge loads to its present debts. Shareholders are quite skeptical that the purchase deal might result in heavy burden of doubling the debts to the company, thereby undermining its profits in the future. The onus thus lies on Verizon to convince its investors on the company’s ability to successfully complete the acquisition of remaining stake in the joint venture.

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