7th Jun 2007 18:11
Vodafone Group Plc07 June 2007 7 June 2007 FURTHER STATEMENT ON AGM RESOLUTIONS Vodafone Group Plc ("Vodafone" or the "Company") has received a letter fromEfficient Capital Structures ("ECS") containing a requisition signed byshareholders holding in aggregate 210,000 ordinary shares. The requisitionprincipally relates to proposals regarding the structure of the Vodafone Group'sshareholding in Verizon Wireless and the Group's levels of debt. The Board ofVodafone has reviewed the proposals from ECS and has unanimously concluded thatcontinued execution of its clearly stated strategy will deliver greater valuefor shareholders. In particular, the Board of Vodafone believes the proposalsfrom ECS would undermine both its ability to maximise the value of itsshareholding in Verizon Wireless and Vodafone's ability to invest in itsbusinesses as well as exploit potential value creating opportunities. The letter from ECS sets out four resolutions which ECS requires the Company, inaccordance with the Companies Act, to submit to shareholders at the Company'sAGM to be held on 24 July 2007. The resolutions are as follows: A. A Special Resolution to amend the Company's Articles of Association to give shareholders the right to direct the Company's Board by means of an Ordinary Resolution of shareholders. B. An Ordinary Resolution that proposals be put to shareholders by 31st March 2008 to alter the Company's capital structure either by the issue of tracking shares or a spin-off, for the purpose of separating out the Company's 45 per cent interest in Verizon Wireless from its other assets. If such proposals are not made, then all fees payable to Directors would be allocated and paid to the Chairman. C. An Ordinary Resolution that proposals be put to shareholders by 31st March 2008 to create a new group holding company to enable the issue of Vodafone bonds directly to Vodafone shareholders, increasing the group's leverage by approximately £34 billion. If such proposals are not made, then all fees payable to Directors would be allocated and paid to the Chairman. D. A Special Resolution to amend the Company's Articles of Association to limit the Company's ability to make any acquisition with a consideration of more than £1 billion or acquisitions with an aggregate consideration of more than £5 billion in any two year period before 31st March 2010, without first obtaining approval from shareholders by Special Resolution in a general meeting, unless Vodafone has first altered its capital structure by the issue of tracking shares and the issue of Vodafone bonds. The Board of Vodafone has considered these resolutions in detail as follows: Resolution B Vodafone's 45 per cent shareholding in Verizon Wireless has generatedsignificant value accretion for shareholders in recent years reflecting itsmarket leading position, superior growth and cash generation. The Board believesthe strategy of maintaining its ownership in Verizon Wireless is in the bestinterest of shareholders at this time. Maximising the value of this shareholding is a key element of Vodafone's currentstrategy and one that is kept under constant review. As part of these reviews,Vodafone has considered a number of alternative structures, including trackingshares and spin off options, to assess whether they might deliver greater valueto shareholders. In summary, the Board has concluded the following: - Tracking shares would be likely to trade at a material valuation discount to the fundamental value of the shareholding given their complexity, lack of transparency and limited rights over the underlying business. Similar discounts in valuation have led many of the tracking shares issued by other companies to be unwound in recent years - Spin off structures would also be likely to create securities that would trade at a material discount to value of the underlying shareholding given the complexities in achieving favourable tax status, the indirect nature of the shareholding, the lack of any assured dividend stream and the Board's view that the UK is not the natural listing for such securities, nor UK shareholders the natural holders of such securities Taken together, these factors have led the Board of Vodafone to conclude thatthe structures proposed by ECS would not deliver to shareholders effectively thevalue of the Verizon Wireless shareholding today and could potentiallysignificantly undermine the Board's ability to maximise the value of theshareholding in the future. Resolution C Over the last three years, Vodafone's net debt has increased from around £10billion to £24 billion and it has returned in aggregate approximately £28billion to shareholders by way of dividends and one off distributions. It hasalso increased its dividend payout ratio to 60 per cent of adjusted earnings pershare. Vodafone believes that a substantial increase in leverage from current levels asenvisaged by the ECS proposal to increase debt by approximately £34 billionwould create significant additional risk, constrain future flexibility and erodethe Group's ability to generate value for its shareholders in the future. ECS's proposals would lead to Vodafone becoming a sub-investment grade borrower.As such Vodafone's cost of debt would rise materially contributing toincremental interest expense of at least £2 billion per annum. At this level ofleverage it is unlikely that Vodafone could benefit from tax deductibility onthe full interest amount. Vodafone's existing dividend policy would also be putat risk. The Board of Vodafone regularly reviews its capital structure and distributionpolicy and believes that its current capital structure appropriately balancesthe needs of its European businesses, and the challenging markets in which theyoperate, while maintaining flexibility to invest in selective growthopportunities including acquisitions in the EMAPA region. Resolutions A and D The resolutions proposed by ECS to amend the Articles to allow shareholders togive directions to the Board at lower voting thresholds and limit the Company'sability to make acquisitions would significantly constrain the Board'sflexibility in managing both Vodafone's global business and implementing itssuccessful strategy to deliver value to shareholders. In particular, the requirement to seek shareholder approval for acquisitions atthe low levels proposed by ECS would place Vodafone at a material disadvantagein competing for assets. In the view of the Board, this type of constraint couldhave prevented Vodafone from making many of the significant and attractive valuecreating acquisitions it has made in recent years, such as those in Romania,Turkey and India. The Board of Vodafone has already established and communicatedclear financial criteria for all acquisition activity. The Board of Vodafone welcomes an active and open dialogue with itsshareholders. However, having taken advice, it believes that implementation ofECS's proposals would not be in the interest of Vodafone's shareholders. TheBoard believes that the Group's recent financial results confirm the benefitsbeing delivered to shareholders through the delivery of its strategy. It remainsconfident that continued execution of this strategy will deliver sustainedgrowth in value for shareholders. - ends - For further information: Vodafone Group Investor Relations Media RelationsTelephone: +44 (0) 1635 664447 Telephone: +44 (0) 1635 664444 Notes to Editors As at 7th June, Vodafone has 52,909,904,713 ordinary shares in issue (excludingtreasury shares). A Special Resolution needs at least a 75% majority of those voting to beapproved. An Ordinary Resolution needs over 50% majority of those voting to beapproved. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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