Verizon Communications Inc. (NYSE:VZ) now faces a lawsuit filed by a shareholder in connection with its plans to acquire the rest of its Verizon Wireless joint venture. Natalie Gordon filed the suit in New York on Thursday just days after Verizon announced that it would buy the 45 percent of Verizon Wireless that’s currently owned by Vodafone Group Plc (NASDAQ:VOD) (LON:VOD).
Verizon already owns the other 55 percent of the carrier. Currently Verizon Wireless has approximately 100 million subscribers.
Jonathan Stempel of Reuters reports that Gordon is attempting to void Verizon’s $130 billion buyout of the rest of Verizon Wireless. Her complaint alleges that the purchase price for the acquisition is too high. She also claims that the purchase shortchanges Verizon’s shareholders.
Verizon Communications Inc. (NYSE:VZ) agreed to pay $59 billion in cash to Vodafone, plus $60 billion in stock and other assets.
Did Verizon Communications overpay?
According to Gordon, it’s clear that Verizon Communications Inc. (NYSE:VZ) has paid too much for the other part of its joint venture. She claims that “Wall Street analysts concur” and notes that Verizon’s credit rating has been downgraded by Moody’s Investors Service. The firm downgraded Verizon’s rating to Baa1, which is a low investment grade because of the company is planning to increase its debt by $67 billion—more than doubling its current debt load. However, Moody’s lists the company’s outlook as stable.
The shareholder also claims that a Sept. 3 decline in Verizon Communications Inc. (NYSE:VZ)’s share price is another sign that the wireless carrier overpaid. That date was the first trading day after Verizon and Vodafone announced the deal. Verizon’s stock price fell from its peak of $48.60 a share on Aug. 29, which was when the news that Vodafone and Verizon had begun fresh talks for a deal for Verizon Wireless. On Sept. 3 after the two companies had revealed the terms of their deal, shares of Verizon dropped to $45.08 a share. That’s a 7.2 percent decline, although the lawsuit calls it “almost 10 percent.”
The plaintiff is attempting to get the suit classified as a class action case. In addition to naming Verizon Communications Inc. (NYSE:VZ), it also names 12 of the company’s directors as well as CEO Lowell McAdam as defendants in the case. The suit claims they breached their fiduciary duties.
The lawsuit is aimed at trying to force Verizon to either get better terms for the deal with Vodafone or otherwise rescind the purchase of the remaining 45 percent of Verizon Wireless. The suit is also attempting to get the individuals named as defendants in the case to pay damages.
According to Reuters, Gordon is being represented by Faruqi & Faruqi and has been a plaintiff in a number of other suits that have been filed by the same law firm in the past.