Vodafone, the world's largest mobile telecommunications giant made the biggest equity offering deal to China Mobile Ltd by selling off its 3.2% shareholding as a part of a business strategy to divest insignificant minority holdings that may not induce desired results for the company. The stake sale is about to fetch the company 4.3 billion pounds ($5.6 billion). The deal is looked upon as a biggest one in the Asia-Pacific region in the ongoing year.
Both the companies engaged in the transaction deal will continue and nurture their commercial operations in the areas of roaming, network roadmap development, multinational customers and green technology irrespective of the stake sale.
Since the deal holds huge amount of money, Vodafone has appointed three major banks for this transaction – Morgan Stanley, Goldman Sachs and UBS. Hiring the world’s major banking giants has helped ease the intensity of the bidding action for Vodafone.
According to Vodafone’s statement after the deal, the company shareholders will get a major chunk of the profits generated by this transaction. The 3.2% stake amount includes equities involved in 642,868,587 shares totaling up to 70% of the entire deal, while the remaining amount would be invested to deduct the net debit of the Vodafone group. However, the shareholders will need to be involved in the share buyback to obtain the mentioned benefit.
In 2000, Vodafone had purchased 2.18% stake in the China Mobile and the shareholding was increased up to 3.2% in the next two years.
Incidentally, Vodafone announced the details of the transaction on the same day when India’s Bombay High Court ruled that Indian tax authorities has the right to demand USD 2 billion taxes related to Vodafone's 2007 acquisition of the Indian assets of Hong Kong-based Hutchison Telecom. Taking cues from this negative event, Vodafone’s shares slipped over 1% on the London Stock Exchange on Wednesday.