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Verizon to Settle Investor Lawsuit

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According to news reported by Bloomberg, leading telecom carrier, Verizon Communications Inc. (VZ - Free Report) has agreed to settle a pending lawsuit against its $130 billion deal with Vodafone Group plc (VOD - Free Report) to acquire its 45% stakes in Verizon wireless. The lawsuit was filed by investor Natalie Gordon in New York State Supreme Court with the aim of obstructing this deal. Following the Federal Communications Commission (FCC) approval, Verizon’s eagerness to settle disputes that may hamper successful completion of this deal is a positive sign. Thus, we remain hopeful of the deal’s closure in the stipulated first quarter of 2014.

On Dec 6, both the parties involved in the lawsuit signed a memorandum to settle the dispute, which has been filed in the court this week. This settlement is now awaiting the green signal from court. Verizon is currently looking forward to its shareholder’s meeting on Jan 28. Apart from a vote in favor of the acquisition, the company expects its shareholders to pass the issuance of as many as 1.28 billion shares to complete the deal.

For Verizon, the total buyout of its wireless business would mean saving a substantial amount of the payment that slips into Vodafone’s pocket. Verizon Wireless, with operating income over $21 billion not only remains a key driver of Verizon Communications’ earnings, but also provides a competitive edge over big names like AT&T, Inc. (T - Free Report) and the rapidly growing Sprint Corp. (S - Free Report) .

This deal is touted to be one of the biggest in the telecom space after Vodafone’s acquisition of Germany’s Mannesmann AG in 2000 (for approximately $142 billion) and Time Warner Inc.’s merger with AOL (for $124 billion) in 2001. We believe the complete takeover of its wireless business would translate into greater synergies for Verizon, which already holds a significant place in the U.S. wireless market.

Verizon currently has a Zacks Rank #3 (Hold).

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