Financial Times-Lex-11/15
Vodafone misdials
The die is cast. In rejecting Vodafone's bid proposal yesterday, Mannesmann has set the scene for the world's largest hostile takeover battle. How is the contest likely to pan out, assuming Vodafone now proceeds to launch an offer?
Encouragingly, Mannesmann is indicating that it intends to mount a value-based defence, rather than a "barbed wire" one. The latter is possible thanks to Mannesmann's by-laws and German regulations, which make hostile bids for the company difficult. Of course, it is possible that this promise of good behaviour is just public relations spin. Mannesmann's board could always change its tune if it felt it was losing the value argument.
But assuming Mannesmann stands by its word, the key issue is whether a fusion of the two companies would create value for their shareholders. Despite some differences of strategy, this seems likely. Geographically, their mobile networks fit together like hand and glove. Indeed, it seems hard to see a merger with any other partner adding more value to either's shareholders.
The question then is not whether Vodafone and Mannesmann should merge, but the price at which a deal should be struck. Vodafone is understood to have offered E203 a share in its own shares for the group. There is no reason why Mannesmann should roll over at this level, a mere 10 per cent premium to its Friday close. Arguably, it was undervalued relative to Vodafone because of its engineering interests, which it is (slowly) demerging. It should fight its corner on value. But if Vodafone makes a satisfactory offer, Mannesmann should not frustrate it. |
