Financial Times-11/12
VODAFONE: Investors set to dial M for Mannesmann
Vincent Boland explains why Vodafone will find shareholders ready to back a bid
Chris Gent, chief executive of Vodafone AirTouch, is used to presenting shareholders with bumper sales figures and pointing out the value his company has created in the past few years.
Next week, when he unveils interim results, things might be a little different. Mannesmann is threatening to turn from partner to rival with its purchase of the UK's Orange, throwing into doubt Vodafone's European strategy of partnerships with the German company.
Shareholders said yesterday they would be asking Mr Gent how he intended to respond since Vodafone is the junior partner in several of their European mobile partnerships. "We have a lot of faith in Vodafone management," one said. "But if they don't get Mannesmann, then the market will be very concerned about where that leaves them in Europe."
Most shareholders said the ideal scenario would be for Vodafone to buy Mannesmann to fill the gap in its European operations. "We don't want to see Mannesmann go elsewhere," another said, echoing the views of many who said they would look favourably on a Vodafone bid for the German group.
But how high is the pain threshold for these shareholders if Vodafone were to launch a hostile bid? The management's track record, which has turned it into a global mobile operator, provides it with a lot of ammunition if it were to launch a bid.
Its core shareholder base, which includes Prudential, Deutsche Bank Asset Management, Schroders and Standard Life, has been remarkably stable in the past few years and has had its loyalty rewarded handsomely. "A lot of shareholders have made tons of money and that has created great goodwill which is there to be leveraged," a fund manager said.
Another shareholder said: "Vodafone has proved to be very fleet of foot in manoeuvering around the competition and developing new franchises and technologies. I suspect next week may be too early [for any bid for Mannesmann] but I definitely back them to do it."
Investors argued that a bid would not be complicated by a 5 per cent voting ceiling attached to stakes in the German group. Since any takeover attempt would take months to consummate, the transaction would not be completed before that provision is due to expire in the middle of next year.
Some also suggested the cost of an acquisition - a figure of E220 a share has been doing the rounds in the market - was not insurmountable despite Mannesmann's soaring share price. Vodafone's shares have also risen, increasing its firepower.
One shareholder said the lack of a plausible white knight for Mannesmann meant Vodafone would not have to dilute shareholders excessively. "I don't see a credible competitor out there," he said. "Olivetti is not in shape, the southern Europeans are too small, France Telecom appears to want to buy Orange." |
