Verizon-Led Deals Cut Billions From Cash Pile: Chart of the Day

Jun 09, 2014 12:01 am ET

June 9 (Bloomberg) -- Cash hoarding is so last year. As U.S. companies cut deals at a faster clip, spending is back in vogue.

The CHART OF THE DAY shows corporate cash in the most recent quarterly filings fell about $90 billion, the largest drop in at least four years, according to data compiled by Bloomberg. More than half of that decline came as Verizon Communications Inc. in February completed its $130 billion purchase of Vodafone Group Plc’s minority stake, reducing Verizon’s cash by $51 billion.

The data confirms anecdotal signs of increased spending in early 2014 by companies such as Apple Inc., which boosted a share buyback program by $30 billion and raised dividends. While U.S. non-financial companies are still sitting on $1.95 trillion compared with $2.04 trillion a quarter earlier, the new-found lavishness may reassure investors clamoring for acquisitions and stock repurchases.

“We’re seeing a massive number of deals worth $10 billion or more,” said Jack Ablin, who helps manage $66 billion in assets as chief investment officer of BMO Private Bank in Chicago. He also cited research and development spending and rising dividends for the cash reduction.

“The underlying driver is improving confidence. There is a lot more business enthusiasm and optimism now.”

The value of takeovers announced in 2014 reached $1 trillion in April, the fastest pace in seven years, according to Bloomberg data. While it may be too early to call a turning point for corporate cash management, Ablin said capital could continue falling for several years as companies pursue large transactions.

Verizon completed the biggest transaction in a decade in February when it closed the purchase of Vodafone’s 45 percent stake in the wireless unit. The deal included about $59 billion in cash and $60 billion in stock. Verizon, which raised capital for the transaction, saw its cash fall to $3.5 billion in the first quarter from $54 billion.