Verizon Communications will buy the British firm's 45% stake in their joint US venture Verizon Wireless for $130bn (£84bn), in an agreement which could provide a boost to the UK economy.
Verizon Wireless is most profitable mobile service provider in the US and the new agreement is the culmination of Verizon Communications' decade-long attempt to win full control of it.
Under the terms of the deal, Vodafone would get $58.9bn (£38bn) in cash, $60.2bn (£39bn) in Verizon (NYSE: VZ - news) stock, and an additional $11bn (£7bn) from smaller transactions that would take the total deal value to $130bn, Verizon said.
There is speculation it would issue a special dividend which could yield investors up to £40bn in total - cash that might find its way back into the economy, partly through tax.
However, there is also the possibility of controversy over the way the deal is arranged amid reports that Vodafone's tax liabilities will be minimised by completing the transaction through its Luxembourg subsidiaries and other offshore companies.
Margaret Hodge, chairwoman of the Commons Public Accounts Committee which has investigated corporate tax avoidance, said she wanted the deal to be examined in detail.
"Clearly there are concerns on this deal," she said.
"I just want some assurance that HM Revenue and Customs (HMRC) will be going through this deal with a tooth comb to ensure that the taxpayer gets the proper benefit under the law of the tax that Vodafone should pay on this massive windfall profit that they are making."
Mrs Hodge urged HMRC to ensure there was no "aggressive tax avoidance" in the way the deal was done.
Vodafone chief executive Vittorio Colao told Sky News: "We apply standard rules and we have to apply standard laws in all the countires.
"If this transaction happened in the UK, under UK standard rules this transaction would not be taxable. These rules have been there for years.
"Now the transaction happens in Netherlands which are the exactly the same rules as the UK. Now the important thing is there are £54bn going back into our shareholders many millions fo whom are UK and will benefit from transaction."
The only larger deals in corporate history were Vodafone's $183bn acquisition of Mannesmann in 2000 and internet giant AOL (NYSE: AOL - news) 's $182bn takeover of Time Warner (NYSE: TWX - news) in 2001.
Verizon has had a long-standing interest in buying out its partner, but the two companies have never managed to agree on a price until now.
Analysts said Verizon wanted to pay around $100bn for Vodafone's stake, while Vodafone had been pressing for the higher sum.
Vodafone shares, which rose sharply last week, rose 4% in early trading on Monday before extending those gains past 12% in the afternoon.
The change is not expected to have much of an effect on Verizon consumers or on its operations as Vodafone had little influence on Verizon Wireless' operations.
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