Proxy advisory firm Glass Lewis has come out in favor of an activist proposal to put Vodafone’s (VOD) share of Verizon (V) Wireless "in a tracking stock or a new holding company", according to WSJ.com. The UK cellular company has a minority piece of the US venture.
There are arguments on both sides, but perhaps the best one in favor Vodafone keeping the minority position is that its shares do so much better than Verizon’s.
Verizon’s best business is its cellular operation. It landline segment is being eaten by VoIP competition. Its fiber-to-the-home products are still immature. If Verizon would spin-out its wireless operation, it might make sense for Vodafone to go along and put its piece into the new public company. As a whole, that entity should do better in the market.
But, having a tracking stock which is a minority interest in a division of a public company doesn’t really have a benefit. Verizon Wireless may pay-out some dividend to Vodafone from time-to-time, but there is no guarantee that a tracking stock would then redistribute those sums.
Is owning a piece of the US wireless company part of the reason that Vodafone’s shares do better than Verizon’s? That is impossible to tell.
But, with its stock up 60% over the last year, Vodafone’s shareholder have very little reason to push for a restructuring of the company, especially one with such an unclear outcome.
Douglas A. McIntyre
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