Vodafone Opens Tender Offer in Its Hostile 89 Billion Pound Mannesmann Bid
By Kate Norton
Vodafone Opens Tender Offer in Hostile Mannesmann Bid (Update2)
(Adds investor comment in 4th paragraph, details from press
conference from 7th paragraph.)
London, Dec. 23 (Bloomberg) -- Vodafone AirTouch Plc, the
world's largest cellular phone operator, set the clock ticking on
its hostile $143 billion bid for Mannesmann AG, making a formal
offer to shareholders of Germany's largest mobile phone company.
Shareholders of the German company will have until Feb. 7 to
mull the offer of 53.7 Vodafone shares for each Mannesmann share,
after it opens tomorrow. The offer is worth 254 euros ($260) a
share at yesterday's closing stock prices.
The U.K. company is going directly to shareholders after
Mannesmann management rejected the offer as too low and said the
companies' strategies didn't match. Vodafone said it is open to
talks with Mannesmann while insisting it will not increase the
offer unless a higher bid emerges.
``This transaction makes sense as it stands and we support
it,' said Grant Wilson, a fund manager at Martin Currie Ltd.,
which has about 6 billion pounds ($9.6 billion) under management,
including stakes in both companies.
Central to Vodafone's argument is its contention that a
combined Vodafone-Mannesmann would dominate Europe's market for
mobile phone services, which is expected to more than double in
value by 2003.
Mannesmann CEO Klaus Esser, meanwhile, says the company is
better off alone with its strategy of combining traditional voice,
data and mobile services. The company expects its phone units to
grow 30 percent annually by following that strategy.
Vodafone's shares rose 3.75 pence to 300.5p. Dusseldorf,
Germany-based Mannesmann rose 3.6 euros to 234.75 euros. The terms
of the offer are unchanged from when the bid was made Nov. 19. The
U.K. company repeated the offer is final.
Chief Executive Chris Gent said at a press conference in
Dusseldorf Vodafone still has no plans to include a cash element
because it would increase the company's debt. Vodafone has vowed
to maintain its single ``A' credit rating. What's more, there has
been very little pressure or requests from Mannesmann shareholders
for a cash component, he said.
Vodafone would change the terms only if another bidder made a
higher offer for Mannesmann, Gent said.
Defense Document
Still, some investors will they'll postpone a decision on
whether to tender shares because events that occur during the
offer period could affect Vodafones shares, and consequently, the
value of the offer. Vodafone's share gains since the offer was
made Nov. 19 have already added $10 billion to the value of the
bid.
Mannesmann said yesterday it still opposes the offer. It will
have 14 days to issue its defense document, where it will detail
the case for remaining independent.
CEOs of both companies have lobbied investors in a series of
meetings in the U.S. and Europe in recent weeks. Those efforts are
expected to intensify as the offer deadline looms, analysts said.
The offer can be extended by two weeks under German takeover
rules.
Vodafone, detailing for the first time the benefits it
expects to reap from the takeover, said it expects savings of
about 500 million pounds ($803 million) in 2003 and about 600
million pounds in 2004 by linking the two companies.
Some 20 to 25 percent will stem from additional sales and 40
percent from cost savings, such as bulk purchases of mobile
phones, Vodafone said. The combined company would keep a
supervisory board. It also repeated it doesn't plan any job cuts
at Mannesmann.
CEO Gent, stressing in an interview he remains ready to talk
with his counterpart at Mannesmann, said he sees strong growth
prospects in new technology that will enable mobile phones to
transmit data at faster rates and even hold videoconferences on
the run. As the biggest buyers of networks using the new
technology, the combined company will also reap bigger cost
savings than rivals, Gent said.
License Auctions
Several European countries, including the U.K., will auction
mobile licenses to operate using the new technology next year. In
anticipation, Vodafone will make a presentation in January of the
company's plans for its wireless Internet business, Gent said. One-
third of Europeans will surf the Internet using mobile phones by
2004, according to Forrester Research.
``It will be a very powerful demonstration, not just because
of what we plan to do, but whom we plan to do it with,' Gent
said.
The U.K. company is close to an agreement with Sonera Oyj for
the Finnish phone company's cellular Internet portal.
Vodafone says it needs the backing of investors holding 50.1
percent of Mannesmann. That would allow the company to make
changes in the supervisory board and, later, the management board.
The company also plans to list its shares on the Frankfurt
stock exchange and might apply for a listing before the Mannesmann
offer is closed. That would make it easier for fund managers that
can hold only stocks denominated in euros to trade in their
shares. |
