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An Investor Filed A Suit Against Verizon Communications Inc (NYSE:VZ) – Vodafone Group Plc (ADR) (NASDAQ:VOD) Deal Of $130 Billion

Written by on September 9, 2013

Verizon Communications Inc (NYSE:VZ) has been sued by a shareholder looking for cancelling its $130 billion acquisition of Vodafone Group Plc (ADR) (NASDAQ:VOD)’s stake in the companies’ wireless joint venture on the concern that the price charged is too high. On Thursday, just three days after the transaction was announced, Natalie Gordon said in a lawsuit filed in a New York state court, that Verizon shareholders are being “shortchanged” by the acquisition of Vodafone’s 45 percent stake in Verizon Wireless, the largest U.S. mobile phone operator.

Verizon, which is the owner of other 55 percent, settled to pay Vodafone $59 billion in cash, $60 billion in stock and other sums. Verizon Wireless has almost 100 million customers. Gordon said it is obvious that Verizon has paid more, further adding that Wall Street analysts agreed to it and that Moody’s Investors Service put down Verizon’s credit. She also highlighted a decline in share price of Verizon to $45.08 on September 3which was first trading day after the announcement of acquisition, from a climax of $48.60 on August 29. The lawsuit illustrated the 7.2 percent fall as about 10%.

The lawsuit is looking for class-action status, and also names Verizon Chief Executive Lowell McAdam and 12 directors as defendants, criticizing them for violating their fiduciary duties. It aims to pressurize Verizon to withdraw the acquisition or make the terms better, and force the individual defendants to compensate for damages. Randal Milch, Verizon executive vice president and general counsel, said in a statement that they believe this lawsuit is completely with no merit, and Verizon aims to defend itself strongly.

The Verizon-Vodafone will end their 14-year joint venture and the deal will be the third major in corporate history. Moody’s downgrade has put Verizon’s long-term credit rating at “Baa1” which is a low investment grade, indicating the company’s plan to gain $67 billion of debt and more than double its debt load. However, Moody’s ratings viewpoint is “stable.” Verizon Communications Inc. (NYSE:VZ) shares were off -1.92% in premarket. Vodafone Group Plc (ADR) (NASDAQ:VOD) shares were up 0.30% in premarket.

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