After reaching a ten-year high on renewed bid talk on Tuesday, Vodafone’s shares had closed 3% up at 192p but were 2.5% down by mid-morning on Wednesday at 187p.
Speculation of a combined takeover of the FTSE 100’s third-biggest constituent by US telecoms firms Verizon Communications and AT&T had reached fever pitch during Tuesday trading due to talk of vast tax liabilities Vodafone would face if it sold only its stake in Verizon Wireless.
As a darling of UK equity income managers, 303 UK unit trusts count Vodafone within their top ten holdings.
Of these, the Newton Higher Income Fund, run by Richard Wilmot since December, when he took over from long-term manager Tineke Frikkee, is one of the biggest active mandates at £2.3bn.
Vodafone is the fourth-largest holding in Wilmot’s fund at 5.7%, with telecoms one of the largest overweights of the fund compared with the sector.
Another high-conviction holder of Vodafone is Karen Robertson manager of Standard Life Investment’s £656m UK Equity High Income Fund, with the telecoms giant her third-largest holding representing 5.5% of the fund.
Jonathan Jackson, head of equities at stockbroker Killik & Co, said the share price of Vodafone had held up pretty well considering Verizon’s statement.
“This suggests the market still thinks some deal is on the table,” he said.
Following its announcement, Verizon is prevented from bidding for Vodafone in the next six months unless the board of the British firm recommends it or if a third party wades in with an offer.
This is due to restrictions under the City code on takeovers and mergers.
Verizon did confirm, however, that it would be a “willing purchaser” of Vodafone’s 45% stake in Verizon Wireless, which Jackson suggested was the main factor preventing Vodafone’s share price from falling further.
“For the past few years there has been a disagreement over price but the market thinks it cannot go on forever and expects something to happen this year,” he concluded.
