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Vodafone Board: Hold the Mayo

The board of Vodafone Group plc (NYSE: VOD) has responded to the capital structure proposals put forward by shareholder Efficient Capital Structures (ECS), saying the suggested changes would reduce shareholder value.

ECS, backed by former Marconi boss John Mayo, has put forward four resolutions for the mobile operator's annual general meeting (AGM) to be held on July 24, including one that says shareholders should be able to vote on whether Vodafone should sell its 45 percent stake in Verizon Wireless . (See Vodafone: Time to Scold the Mayo?)

Vodafone says the proposals "would undermine both its ability to maximize the value of its shareholding in Verizon Wireless and Vodafone's ability to invest in its businesses as well as exploit potential value creating opportunities."

Of the four resolutions put forward, Resolution B was the one demanding either the spin off or issuance of tracking shares. Tracking shares are shares in the parent company that pay a dividend directly tied to a specific division's -- in this case Verizon Wireless -- performance.

Vodafone says that tracking shares would "be likely to trade at a material valuation discount to the fundamental value of the shareholding" and that a spin off "would also be likely to create securities that would trade at a material discount."

Despite the board's unanimous rejection of the ECS proposal, Vodafone is still legally obligated to have the shareholders vote at the AGM on July 24 according to a Vodafone spokesman. But with the board's decision already being made, it is very unlikely that the shareholders will accept ECS's proposals.

Shares of Vodafone have opened up $0.07 (0.22%) to $31.31 on the New York Stock Exchange (NYSE) .

— Raymond McConville, Reporter, Light Reading

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