Vodafone AirTouch May Sweeten $135 Billion Mannesmann Bid, Investors Say
By Kate Norton
Vodafone Could Sweeten Mannesmann Bid, Investors Say
London, Nov. 25 (Bloomberg) -- Vodafone AirTouch Plc is likely to sweeten its hostile $135 billion bid for Mannesmann AG as the world's largest wireless service provider attempts to woo the German company's shareholders, investors said.
Mannesmann's shares are currently 18 percent below Vodafone's all-stock offer worth 240 euros a share, indicating some investors think Germany's No. 1 mobile phone company can succeed in repelling Vodafone. The U.K. company needs to offer more shares or add a cash element to secure control, fund managers said. "With the current offer, Vodafone won't be successful," said Stefan Voelkel, who helps manage 6 billion deutsche marks ($3.14 billion) in stocks, including Mannesmann, at BfG Investment in Frankfurt.
The U.K. company was forced to go directly to shareholders after Mannesmann's management board rejected Vodafone's offer as too low and said the companies' strategies didn't match.
Vodafone Chief Executive Chris Gent said in an interview yesterday he's willing to talk with his counterpart at Mannemann, Klaus Esser, but he hasn't gotten any feedback from the German chief executive.
But a sweetened bid could even persuade Esser, some analysts said. Esser told German regional newspaper Rheinische Post he doesn't rule out a "friendly solution" if Vodafone makes an offer that is acceptable for shareholders.
Mannesmann shares rose 13.5 euros, or 7 percent, to 200.5 euros, on optimism the two companies will reach a compromise, traders said. Vodafone shares rose 19.5p, or 7 percent, to 299p.
Though Vodafone's Gent has repeatedly said the bid is final, under German takeover rules the U.K. company can change the terms at any time, even after the offer document is published in mid-December. "There's still a little bit of blue sky between what Esser thinks Mannesmann is worth and what Gent thinks," said Jim Sterang, who helps manage 3.5 billion pounds ($5.6 billion) in U.K. equities for Edinburgh Fund Managers. "Vodafone needs to come a little closer and Esser needs to lower his estimates more."
Ceding Control
Though some investors have criticized the offer for being only stock, Gent said he won't include a cash element because it will increase the company's debt. Vodafone has vowed to maintain its single "A" credit rating.
But without a cash portion, Vodafone can't offer more than 60.4 shares, or 261 euros per share, based on yesterday's share prices, without ceding control of a combined company. Mannesmann is worth 235 euros per share, but could be worth more than 282 euros per share to a company eager to acquire it, according to a recent Commerzbank report.
Vodafone will have to prove the new company can grow faster than Mannesmann can on its own, Esser told, the Rheinische Post. Mannesmann combines traditional voice and mobile services while Vodafone focuses on wireless services. The Germany company cited the difference in strategies as a key reason for rejecting the offer.
Compromise Desired
A compromise is the best solution, analysts and investors said, because together, the two would dominate Europe's fast-growing wireless market. Yet Mannesmann can afford to hold out for better terms because it controls two of Europe's three largest mobile phone companies, analysts said. "The booming European mobile phone market, with its high margins, has enormous potential," said Ralf Hallmann, an analyst at Bankgesellschaft Berlin, who has a "no action" rating on the stock. "Mannesmann controls the most important European markets."
To be sure, winning over shareholders with a sweetened offer may be only half the battle. Gent's whirlwind tour through Germany this week has been as much about appeasing the concerns of politicians and unions as it has been about lobbying investors. Non-German investors hold some 60 percent of Mannesmann's stock. Mannesmann workers staged protests against the plan after the Vodafone bid was announced on Friday. German Chancellor Gerhard Schroeder, too, warned against hostile takeovers of German companies in an interview with the French newspaper Le Monde, saying they "destroy the culture of the company."
Gent, who has met with the mayor of Dusseldorf and the prime minister of the German state of North Rhine Westphalia, where Mannesmann is based, has sought to allay concerns by promising the takeover does not threaten jobs and stressing the similarities of the company's visions. |
