The Monster Merger Deal to Watch For

There have been a number of huge merger deals in the not-too-distant past whose buyout numbers reached into low orbit. The most notorious -- and most scoffed at -- must be when AOL met Time Warner: $182 billion exchanged hands in 2000 before eventually vaporizing (most of it, anyway) along with the supposed synergies the transaction was supposed to generate.

But that was at right at the peak of the dot-com madness. No company would ever fall for that kind of hysterical dealmaking again, right? Maybe not. Never underestimate the appeal of financial madness, especially to those who should be minding the asylum.

The latest deal to end all deals -- by quite a lot -- is rumored to be brewing in the telecom world, this one between Verizon (NYSE: VZ  ) and Vodafone (NASDAQ: VOD  ) , partners in the joint venture called Verizon Wireless. Oh, and one other company, which I'll get to later.

Verizon Wireless has been very good to the partners, and they have been able to split sizable profits from the deal over the past couple of years. Last year, Vodafone received $8 billion in dividend payments for its 45% share of the venture.

However, Verizon, which holds the other 55%, can choose to withhold those payments if it wants to use the money for acquisitions or capital expenditures. That makes Vodafone a bit nervous, especially as Verizon Wireless has been, as Australian hedge fund Bronte Capital's chief investment officer John Hempton wrote on his company's blog last month, the only bright spot over the last 10 years in Vodafone's "collection of modest success and abject failures."

So instead of thinking about shooting its golden goose, Hempton had another suggestion:

"Any deal where Vodafone sells its Verizon Wireless stake rather than selling itself ... would be insane, ... The best outcome would be the sale of the whole of Vodafone at a good price."

An astronomical price
And that price would be $245 billion, the enterprise value of Vodafone according to sources who spoke to the Financial Times earlier this month. And, still according to those unnamed sources, Barclays USA will put together a three-way deal which would divvy up Vodafone between Verizon and AT&T (NYSE: T  ) . Verizon would assume full control of Verizon Wireless, and AT&T would acquire Vodafone's many overseas assets.

Verizon's interest should be obvious -- the whole slice of the pie -- but why would AT&T want to get a piece of Vodafone? That answer has to do with AT&T's being essentially blocked from acquiring much more of substance in the United States. The FCC's and Department of Justice's nixing of the company's bid to buy T-Mobile USA for $39 billion in 2011 has caused AT&T to look elsewhere for expansion.

Verizon isn't talking ... much. Ten days ago it filed an 8-K current report with the SEC to say this:

Verizon Communications ('Verizon') notes the recent press speculation regarding a potential merger with or purchase by Verizon of Vodafone. As Verizon has said many times, it would be a willing purchaser of the 45% stake that Vodafone holds in Verizon Wireless. It does not, however, currently have any intention to merge with or make an offer for Vodafone, whether alone or in conjunction with others.

And AT&T's not talking at all.

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