Verizon Completes Tender Offer - Analyst Blog
April 04 2011 - 6:15AM
Zacks
A leading telecom company
Verizon Communications Inc. (VZ) purchased 59.8
million shares at $19.00 per share under its $1.1 billion tender
offer to acquire information technology service company,
Terremark Worldwide Inc. (TMRK). With the
completion of the tender offer, Verizon now has approximately 71%
stake in Terremark.
Verizon will commence a second
tender offer to acquire the remaining shares. This offer will
expire on April 7.
In January 2011, Verizon announced
its proposal to acquire of Terremark through a tender offer, which
commenced between February 10 and February 17, 2011.
The transaction was approved by the
board of both companies and Terremark’s shareholders. After the
acquisition, Terremark will operate as a subsidiary of Verizon,
retaining its own name and management team.
The acquisition represents
Verizon’s enthusiasm to rapidly enter the market that delivers
corporate IT services over the Internet rather than an in-house IT
department. Verizon is seeking to expand its advanced business in
order to offset declining revenues from traditional fixed lines.
The deal supports Verizon growth initiative in remote or cloud
computing, an area in which it has been lagging competitors like
AT&T Inc. (T).
We expect Verzion’s growth
prospects to be strong driven by new customers, higher smartphone
adoption, fourth generation (4G) Long Term Evolution mobile
broadband network and the sale of Apple Inc.’s
(AAPL) iPhones in February, which led to revenue growth. However,
Verizon may spend considerably to promote the iPhone this year,
thereby hurting its margins in the short term. Further, the
offerings of various devices including smartphones that support the
4G network would strengthen Verizon’s position compared to
Sprint Nextel Corp. (S), which was the first to
launch 4G smartphone handsets nationwide in 2010.
However, persistent erosion in
access lines as well as intense competition from cable companies
and other alternative services providers may be the downside. In
addition, the 4G infrastructure may be an obstacle if other service
providers shift to different generation technologies.
We are currently maintaining our
long-term Neutral rating on Verizon with the Zacks #3 (Hold)
Rank.
APPLE INC (AAPL): Free Stock Analysis Report
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
TERREMARK WRLWD (TMRK): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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