Dealmaker of the Week: Simpson Thacher's William Curbow

DEALMAKER

William Curbow, 53, a corporate partner in the New York office of Simpson Thacher & Bartlett.

THE CLIENT

British telecommunications giant Vodafone Group

THE DEAL

Vodafone is selling its 45 percent stake in Verizon Wireless to joint venture partner Verizon Communications for $130 billion in cash and stock. Verizon already held the remaining 55 percent stake.

THE DETAILS

Announced Monday, the deal calls for Verizon to pay Vodafone $58.9 billion in cash, along with $60.2 billion in Verizon shares, in order to gain full control of Verizon Wireless—the largest mobile operator in the United States. The total consideration also includes $7.5 billion of loan notes and reduced liabilities as well as $3.5 billion in the form of Verizon's sale of a 23 percent stake in Vodafone Italy back to the British company.

The deal—which is subject to the approval of both Vodafone's and Verizon's shareholders, as well as regulatory approval—is expected to close in the first quarter of 2014. The agreement also called for Verizon to pay a $10 billion breakup fee to Vodafone if the U.S. company was unable to secure financing for the deal.

The massive deal drew in a host of attorneys with as many as 10 law firms around the globe landing advisory roles. Curbow's team at Simpson also worked with attorneys at Slaughter and May, which served as Vodafone's U.K. counsel, while Hogan Lovells is serving as FCC counsel, according to our prior reporting. Slaughter and May's Dutch alliance firm, De Brauw Blackstone Westbroek, is also advising Vodafone.

THE BIG PICTURE

The deal is the third-largest M&A transaction in history, with only Time Warner's regrettable $182 billion cash-and-stock merger with AOL in 2000, and Vodafone's own $173 billion purchase of Germany's Mannesmann AG in 2008, surpassing its value. It culminates a collaboration on the U.S. mobile network that formed out of a joint venture Vodafone first agreed to with one of Verizon's predecessor companies, Bell Atlantic, in 1999.

Verizon had toyed with the idea of buying out Vodafone's stake for years, but Verizon CEO Lowell McAdam said this week the matter gained urgency recently due to the U.S. company's concern that rising interest rates could eventually make the deal more difficult to pull off given the massive loans needed to cover the cost. The New York Times wrote Friday that Verizon's desire to reach an agreement quickly may have driven up the price, which had been predicted at roughly $100 billion by analysts as recently as April.

For its part, Verizon is betting heavily on growth in the domestic wireless market and the company said it expects full ownership of Verizon Wireless will increase its own earnings per share by roughly 10 percent after the deal closes. Vodafone, meanwhile, can now reinvest the giant influx of capital into its own mobile plans. Vodafone, whose shareholders will receive $23.9 billion in cash and Verizon shares equal to 30 percent of the company, said it will put its windfall to use with what it calls "Project Spring"—a plan to build out its network over the next three years through various investments in emerging markets.

The size of this deal, plus Microsoft's $7.2 billion purchase of Nokia's mobile phone business (another telecom deal announced Monday that featured a separate Simpson Thacher team advising Microsoft), is also likely to have an impact on the M&A market at large, which has seen a dip in overall global deal value thus far this year. Curbow agrees that the size and timing of the two deals could spark further action in an M&A market that has not been particularly active so far in 2013. "I think it could be showing a little bit of a trend, which would be big for us practitioners," he says.

THE BACKSTORY

Curbow, who has been at Simpson Thacher since 1989, says the firm's relationship with Vodafone began in 2003, with the company considering a bid for AT&T's wireless unit. Vodafone made an unsuccessful $30 billion offer for that business, which would eventually sell to Cingular Wireless for $41 billion the following year. Curbow later represented Vodafone in connection with Verizon Wireless's $28.1 billion purchase of regional U.S. carrier Alltel, in 2008.

"I think really what we have done since [the Alltel bid] is to help them with respect to their investment in Verizon Wireless, which is their principal U.S. asset," Curbow says of Simpson Thacher's work with Vodafone over the years.

ON CLOSING

Most reports on the now consummated agreement highlight the secrecy around the brewing deal as it came together over the past several months. As The New York Times notes, negotiations between the two companies were referred to internally as "Project River," while Verizon was called "Hudson" and Vodafone was assigned the code name "Thames." Reuters added that Verizon's McAdams and Vodafone chief Vittorio Colao had reached a preliminary agreement on the $130 billion price tag over a private breakfast meeting in San Francisco at the end of July.

Still, those protective measures did not prevent speculation and leaked information from appearing in various publications throughout the process. In April, Reuters cited anonymous sources in reporting that Verizon was preparing a possible $100 billion offer for the remainder of Verizon Wireless. Months later, information leaked saying that the two companies were on the verge of signing their massive $130 billion deal. Eventually, both sides agreed in principle to the current deal on a phone call held over Labor Day weekend, on Saturday evening, according to reports.

Curbow, who says he became involved with talks around the beginning of the summer, doesn't think rumors and leaks ultimately played much of a role in the pace of the talks. "I don't think it had an impact," he says before adding that pretty much all major deals have a sense of urgency. He says this one was no exception "because it's a large transaction and it's going to attract a lot of attention, so people wanted it to move quickly."

Among the remaining obstacles for the deal, in addition to regulatory approvals, is getting the go-ahead vote from shareholders of both companies. Though most M&A deals don't require the approval of shareholders from both the buyer and the seller, Curbow says the size and importance of the stake being unloaded requires approval from Vodafone's stakeholders. "It's a large and important asset for Vodafone, so technically the sale requires a vote for Vodafone shareholders," he says. For Verizon's part, the fact that the company is issuing more than 20 percent of its own stock as part of the consideration requires the additional shareholder vote on its side as well. "There's over $60 billion in stock being issued, so that triggers a vote requirement," Curbow says. He adds, though, that he sees no reason why either company's shareholders would oppose the deal.