Lessons From The Deal Of The Year

Ser Jing - Do You Know Exactly How Much You Might Be Losing Out in Fees for Funds (pic)When the UK’s biggest telecom company Vodafone agreed to sell its 45% stake in Verizon Wireless to Verizon Communications for US$130 billion, it effectively pulled off one of the biggest deals in corporate history.

The end of the decade-long joint venture could in turn see hundreds of thousands of private investors, together with a host of fund managers, reap windfalls that at one time seemed as remote as an alien abduction. As a Vodafone investor myself, I am obviously as delighted as the 500,000 or so private investors are about the news.

Vodafone’s initial stake in Verizon Wireless, which was formed in 1999, is estimated to be around US$20 billion. Since forming the partnership 14 years ago, Vodafone could have sold its stake much earlier. But it held on doggedly, and its patience has paid off handsomely.

The eventual price tag when added to more than US$15 billion of dividends means that the venture has delivered a seven-fold return for Vodafone shareholders. That equates to total annual return of 15% a year over the 14 years.

Singapore investors may find the return impressive. But before you turn green with envy, nine members of the Straits Times Index (SGX: ^STI) have delivered total returns that not only match Vodafone’s investment return but beat it handily too.

Jardine Matheson Holdings (SGX: J36) and Jardine Strategic Holdings (SGX: J37) have delivered total annual returns of 27% and 26% respectively since 1999. Meanwhile, Genting Singapore (SGX: G13) and Noble Group (SGX: N21) have both delivered returns in excess of 20%. Other notable blue-chip outperformers over the last 14 years include Keppel Corporation and Jardine Cycle & Carriage.

For me, the Vodafone deal is a timely reminder of the importance of buying good companies with the intention of holding them for the long term. So, let us give credit to Vodafone for hanging on to Verizon Wireless until now.

Are you are wondering what I plan to do with my windfall? Well that’s easy – I’ll be ploughing it straight back into the stock market as soon as the money hits my bank account.

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