* Verizon to buy Vodafone's 45 pct of Verizon Wireless
* Ends decade-long stand-off between both companies
* Vodafone to return 71 percent, $84 bln, to shareholders
* Will be third-largest deal of all time
By Kate Holton and Sinead Carew
LONDON/SAN DIEGO, Sept 2 (Reuters) - Verizon Communications agreed on Monday to pay $130 billion to buy Vodafone out of its U.S. wireless business, signing history'sthird largest corporate deal to bring an end to an oftenfractious 14-year marriage.
The two firms said Vodafone would get $58.9 billion in cash,$60.2 billion in Verizon stock, and an additional $11 billionfrom smaller transactions in a deal that is due to close in thefirst quarter of next year.
The British group will return 71 percent of the net proceedsto shareholders, including all of the stock, in a sign that itdoes not expect to go on a new acquisition spree across itsremaining core European and emerging markets.
The move to sell out of the joint venture closes a headyexpansionist chapter for Vodafone, one of Britain's best-knowncompanies, which grew rapidly over the last 20 years through aspate of aggressive deals, taking its brand into more than 30countries across Europe, Africa and India.
The deal is also likely to be the defining event in thecareers of Vittorio Colao and Lowell McAdam, the chiefexecutives of Vodafone and Verizon, who rebuilt relationsbetween the two sides, which had long argued over issuesincluding the level of dividends to be paid from VerizonWireless.
The deal will become the third largest announced deal in theworld after Vodafone's $203 billion takeover of Germany'sMannesmann in 1999 and AOL's $181 billion acquisition of TimeWarner the following year.
"This has been a highly productive partnership in a businesswith excellent momentum," Colao told reporters, adding that hewas "super committed" to the next chapter of the company. McAdamsaid simply that the time was right to buy.
"Today's announcement is a major milestone for Verizon, andwe look forward to having full ownership of the industry leaderin network performance, profitability and cash flow," he said.
UNANIMOUS BACKING
The boards of Verizon and Vodafone unanimously approved thesale.
The deal will give Verizon full access to the wirelessunit's cash, handing it fresh firepower to invest in superfastmobile networks and fend off challengers in a U.S. marketexpected to grow more competitive in the coming years.
Verizon said it expected the transaction to be immediatelyaccretive to earnings per share by about 10 percent, excludingany one-time adjustments.
While Vodafone will lose its best asset, it will get a warchest that it can use to reward shareholders and bolster itsEuropean operations, which are under pressure from recession andtough regulation.
The British firm said it planned to launch a new investmentphase dubbed Project Spring to improve its mobile and broadbandnetworks over the next three financial years.
After returning $84 billion of the sale proceeds to itsshareholders, Vodafone will be left with a $30 billion cashpile. Some $10 billion will go to the Project Spring networkinvestment programme and the rest will be used to pay down debt,bringing down leverage to one times forward operating profit(EBITDA).
Surprisingly, Vodafone is keeping little of the cash on handfor acquisitions, although Colao said that the group couldalways borrow later if attractive deal opportunities crop upthat would create value for shareholders.
Asked where he might consider acquisitions, Colao said only:"I would say first let's complete the deal, then we will talkabout our strategy."
Both groups said they would be in a position to increasetheir dividend. Verizon declared a quarterly dividend of 53cents per share, an increase of 1.5 cents, or 2.9 percent, fromthe previous quarter. Vodafone announced an 8 percent increaseto its total 2014 financial year dividend per share.
Vodafone will be left with a U.S. tax liability of around $5billion.
Boutique M&A firm Guggenheim Partners advised Verizon on thedeal, as did Paul Taubman, a former banker at Morgan Stanley.
A group of banks - JPMorgan, Morgan Stanley, Bank of AmericaMerrill Lynch and Barclays - will underwrite just over $60billion in debt financing to fund Verizon's deal, sourcesearlier said.
Goldman Sachs and UBS advised Vodafone.
Vodafone (VOD)