FOCUS-Vodafone in record hostile Mannesmann bid
(Adds bid premiums, details, Mannesmann board meeting)
By Kirstin Ridley
LONDON, Nov 19 (Reuters) - Mobile phone giant Vodafone AirTouch Plc (quote from Yahoo! UK & Ireland: VOD.L) launched the world's largest hostile bid on Friday with a revised 124 billion euro ($128.5 billion) offer for its European partner, Mannesmann AG of Germany.
The world's biggest cellphone group said it was offering 240 euros per Mannesmann share in an all stock bid, raising an initial 203 euro per share offer which the German telecoms and engineering group had curtly rejected on Sunday.
But Mannesmann shares slipped to below 200 euros on disappointment that the bid, at a premium of around 18 percent to the stock price on Friday, did not include any cash.
Vodafone Chief Executive Chris Gent appealed directly to Mannesmann's shareholders after the German group's Chief Executive Klaus Esser stated that he wanted no further talks.
``This is the only way we can present Mannesmann shareholders with the option of investing in the world's leading, international mobile telecommunications company,' Gent said.
Winning Mannesmann will confirm Vodafone's leadership of a fast deregulating and booming European mobile phone market -- one of the world's biggest growth industries.
The headline price does not include Mannesmann's debt of around 23 billion euros, and banking sources said Vodafone was seeking to raise a record 23 billion pound ($37.2 billion) syndicated loan to help refinance its debt obligations.
ALL EYES ON MANNESMANN'S BOARD MEETING
Vodafone, which wants to win control over prized joint ventures in Germany and Italy, has presented its bid to Mannesmann's supervisory board, which it hopes will help Vodafone win over the German company's management.
The supervisory board, which includes industry heavyweights such as Henning Schulte-Noelle, the chairman of insurer Allianz AG , and Deutsche Bank's managing board member Josef Ackermann, started a key meeting on Friday under a blanket of silence.
The 21 members declined to comment and a Mannesmann spokesman would not shed light on when the company would respond to Vodafone's move.
``We live in hope that having given further consideration they will come back and we might be able to make this a recommended offer,' Gent said.
Stung into action by the German group's $32 billion bid for its domestic arch-rival Orange (quote from Yahoo! UK & Ireland: ORA.L), UK-based Vodafone could make corporate history in Germany, which has yet to see a successful hostile bid by a foreign company.
The offer -- which is expected to be rejected by the German company and set the scene for a high profile and bitter bid battle -- came in midway between expectations of 230 to 250 euros and Gent declared it was ``full, fair and final.'
The bid price is pitched at a premium of 57 percent over Mannesmann's share price when it bid for Orange in October.
``The bid price values Mannesmann fairly and first impressions are that it is not unduly dilutive to Vodafone shareholders providing the management can achieve the synergies thet expect,' said Graham Wood, head of UK and European Equities at investment house Standard Life Investments.
Standard Life holds a stake of just over two percent in Vodafone and 0.25 percent of Mannesmann.
VODAFONE SHARES FALL
Although the price of Vodafone's bid was below some analyst expectations, it sent the British-based giant's shares lower.
By late morning, the stock was some three percent weaker at 276-1/2p, valuing the bid at around 233 euros per share.
Shares in Mannesmann jumped in pre-market business, opening at 211 euros in Frankfurt, up from Thursday's close of 207.50. But the stock later slipped 9.4 euros to 198.1 in nervous trade.
Vodafone said the bid would dilute earnings before interest, tax, depreciation and amortisation (EBITDA) by just under 10 percent in the first year.
Telecoms analysts believe Vodafone has a reasonable chance of winning over Mannesmann's shareholders.
``The bid's chances of success are finely balanced. My feeling is the odds are marginally in favour of a victory for Vodafone,' Mandeep Singh, telecoms analyst at ABN AMRO, told Reuters Television.
The combined group would be the world's leading international mobile phone company with over 42 million customers.
The offer will be 53.7 Vodafone AirTouch shares for each Mannesmann share. Under the terms, Mannesmann shareholders would own approximately 47.2 percent of the combined group.
MANNESMANN EXPECTED TO PUT UP FIERCE DEFENCE
In effort to appease Mannesmann's powerful workforce, which is represented on the group's supervisory board, Vodafone reiterated that it planned no redundancies and that employees would benefit from enhanced growth prospects.
Speculation has risen that Mannesmann might seek the help of a white knight -- a friendly third party to outbid Vodafone. British Telecommunications Plc (quote from Yahoo! UK & Ireland: BT.L), MCI WorldCom (NasdaqNM:WCOM - news) and SBC Communications Inc (NYSE:SBC - news) have all been tipped.
Vodafone has said it expected the deal to generate after tax cash flow benefits of at least 500 million pounds in 2003 and 600 million in 2004.
Under British competition rules, Vodafone cannot own two mobile phone companies. So if it wins Mannesmann, it plans to demerge Orange. It also plans to float around 20 percent of Mannesmann's fixed line telecoms businesses in 18 months.
The German group's engineering business would be spun off and listed, in line with Mannesmann's existing plans.
But Mannesmann could delay a takeover by hiding behind corporate structural rules that could make a hostile bid difficult. It has already tried and failed with one legal challenge against Vodafone's advisers Goldman Sachs, and is expected to attempt others, possibly on German soil.
``No doubt Mannesmann will resist as hard as possible. But if you had to place your bets, you should bet on a successful bid,' noted one analyst. |
