Mannesmann to speed œ5bn demerger plan
Andrew Lorenz, Business Editor-Sunday Times of London
PLANS by Mannesmann to demerge its historic engineering operations are to be accelerated as part of its defence against the record-breaking hostile bid by Britain's Vodafone AirTouch, now worth œ76 billion.
On Friday night, Mannesmann's executive board formally rejected Vodafone's bid, the largest hostile offer ever made, and pledged: "In the course of the coming weeks, Mannesmann will present to its shareholders the future value potential of an independent corporate strategy."
One key element in that strategy will be to bring forward the demerger of the group's engineering and motor component arms, which are valued at about œ5 billion. These subsidiaries, including the tubes operation that was the group's original business, represent old Mannesmann and accounted for 75% of its sales last year.
But after Mannesmann's acquisition of Orange, the deal that triggered Vodafone's bid, the engineering businesses are reckoned to amount to less than 10% of its market worth.
In September, Klaus Esser, Mannesmann's executive chairman, said the group planned to hive off these businesses in 2001. But on Friday at Mannesmann's Dusseldorf base, the group's supervisory board is thought to have discussed advancing the demerger to the first quarter of next year.
There is also considerable interest in some of the operations from potential trade buyers, although Mannesmann will be cautious about approving disposals where there is a high risk of subsequent redundancies.
Early demergers would boost Mannesmann's market worth and highlight the see-through value of its telecoms operations. Esser signalled on Friday his main defence against Vodafone would be an attempt to demonstrate that the British hostile bid did not reflect the longer-term value of Mannesmann's mobile and fixed-line telecoms interests.
Mannesmann will not seek a white knight against Vodafone, nor is it likely to attempt a "Pac-Man" defence by counter-bidding for the British group, now valued at almost œ86 billion.
But Mannesmann is known to have been in contact with other big telecoms groups, and it is conceivable that at least one alliance will be cemented during the battle with Vodafone.
Vodafone on Friday became a Mannesmann shareholder for the first time when its advisers bought about 1% of Mannesmann in the market. With a significant slice of Mannesmann in the hands of arbitrageurs, Vodafone could buy more.
The value of Vodafone's offer dropped on Friday from an initial œ79 billion, Ï240-a-share to Ï232 a share, because of a fall in Vodafone's share price. That is still well ahead of Mannesmann's share price, which closed at Ï193.
Market experts said one reason for the Mannesmann share price fall was a sense that Vodafone may not have bid high enough to secure victory.
About 20% of Mannesmann shares are held by investors that are also shareholders in Vodafone, including Mercury Asset Management, now owned by Merrill Lynch, and Standard Life. Mannesmann's numerous American investors include Capital Group, Fidelity and Putnam. A number of these investors are thought to favour the Vodafone bid. However, some Vodafone investors are said to have given mild, rather than wildly enthusiastic, backing for the bid.
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