Verizon Communications Inc has been sued by a shareholder seeking to void its US$130 billion buyout of Vodafone Group Plc's stake in the companies' wireless joint venture on the grounds the price is too high.
In a lawsuit filed in a New York state court on Thursday, just three days after the transaction was announced, Natalie Gordon said Verizon shareholders are being "shortchanged" by the purchase of Vodafone's 45 percent stake in Verizon Wireless, the largest US mobile phone operator.
Verizon, which owns the other 55 percent, agreed to pay Vodafone US$59 billion in cash, US$60 billion in stock and other sums. Verizon Wireless has about 100 million customers.
Gordon said "it is evident that Verizon has overpaid," adding that "Wall Street analysts concur" and that Moody's Investors Service downgraded Verizon's credit.
She also pointed to a drop in Verizon's share price to US$45.08 on September 3, the first trading day after the purchase was announced, from a peak of US$48.60 on August 29, when news that Verizon and Vodafone had revived talks surfaced. The lawsuit characterised the 7.2 percent decline as "almost 10%."
The lawsuit seeks class-action status, and also names Verizon chief executive Lowell McAdam and 12 directors as defendants, accusing them of breaching their fiduciary duties.
It seeks to force Verizon to rescind the purchase or improve the terms, and force the individual defendants to pay damages.
"We believe this lawsuit is entirely without merit, and Verizon intends to defend itself vigorously," Randal Milch, Verizon executive vice president and general counsel, said in a statement.
Vodafone, which is not a defendant, declined to comment.
Gordon is represented by law firm Faruqi & Faruqi, and has within the last five years been a shareholder plaintiff in several other lawsuits filed by that firm, court records show.
Juan Monteverde, a partner at the New York-based firm, did not immediately respond to a request for comment.
The Verizon-Vodafone transaction would be the third-largest in corporate history, and end their 14-year joint venture.
Talks resumed in earnest this summer as Verizon grew concerned that rising interest rates might make a transaction too pricey.
The price rose from the US$100 billion that Verizon had earlier floated, people familiar with the matter said.
Moody's one-notch downgrade left Verizon's long-term credit rating at "Baa1," a low investment grade, reflecting the company's plan to add $67 billion of debt and more than double its debt load. Nonetheless, Moody's ratings outlook is "stable."
The case is Gordon v. Verizon Communications Inc et al, New York State Supreme Court, New York County, No. 653084/2013.