Vodafone is selling its American Verizon Wireless stakes for £84 billion, the biggest corporate deal in history, but it will not pay the UK any capitals gains tax for the profits.
Vodafone shares have been sharply increasing all week as the sale is being anticipated, with a 4% to 214.65p increase, the highest level in a decade last Monday morning. It is going to be the largest deal ever in recent years, not quite far behind the biggest deal in the world, which was Vodafone’s takeover of the Mannesmann of Germany in the year 2000.
An announcement is expected today regarding the sale of Vodafone’s 45% stake in the largest mobile phone company in the US, with the final details of the exact makeup of the figures still being finalised if it’s going to be £84 billion.
With a major percentage of the money that will be raised expected to be handed on to other British investors, the deal is perceived as a fresh injection of effective quantitative easing. This should stimulate the entire economy, in addition to the Bank of England’s plans for a £375 billion increase in asset purchases. Although this is a positive turn for the British economy, the UK Treasury is set out to miss on the additional benefits that would be derived from the sale.
Because of the complicated nature of the Verizon stakes owned by Vodafone, which comprises of an aged merger with assets that are registered in the Netherlands, the only expected tax cuts and payments that will result from the deal will be the $5 billion tax payment to the US, according to Robert Peston of the BBC.