Vodafone Bids EU133 Billion for Mannesmann, Biggest Takeover Attempt Ever
By Kate Norton
Vodafone Offers to Buy Mannesmann for EU133 Billion (Update2)
(Adds investor comment in 4th paragraph, background from 8th,
updates shares in 7th.)
London, Nov. 19 (Bloomberg) -- Vodafone AirTouch Plc, the
world's largest provider of wireless services, offered 133 billion
euros ($137 billion) in stock and assumed debt for Mannesmann AG
in what would be the biggest takeover ever.
The U.K. company offered 53.7 of its shares, equivalent to
240 euros, for every Mannesmann share. That's 18 percent above
Vodafone's first proposal of 202.65 euros, which Germany's biggest
mobile phone company rejected Sunday.
Vodafone was forced to go directly to shareholders after
Mannesmann Chief Executive Klaus Esser told the British company
yesterday any new offer would be unacceptable. The next step could
be a bidding war as other phone companies line up to help
Mannesmann ward off Vodafone, analysts and investors said.
``The offer isn't high enough,' said Matthias Trimm, a fund
manager at DWS Investment GmbH, which owns more than 1 percent of
Mannesmann. ``It will be a challenge for Vodafone to get a
majority of shareholders to support this bid.'
Trimm wouldn't say what price DWS would accept. The Frankfurt-
based company manages about $85 billion of assets.
Mannesmann said it wouldn't comment on the Vodafone offer
until this afternoon.
Vodafone shares fell 3 pence 280.5p, after touching a low of
269. Mannesmann declined 7.35 euros, or 3.5 percent, to 200.15,
after earlier dropping to 196 euros.
10 Busy Years
The record-breaking plan would combine two companies that
only recently came to play dominant roles in telecommunications.
Ten years ago, Mannesmann was best known as the inventor of
seamless steel tubing and had just won its first German mobile
phone license. And Vodafone, then a unit of Racal Electronics Plc,
was still building a U.K. cellular network.
In a letter sent yesterday to Vodafone Chief Executive Chris
Gent and former AirTouch CEO Sam Ginn, Mannesmann's Esser appealed
to the British company to reconsider. Mannesmann argued that the
two companies have different strategies and are better off as
independent partners, people who saw the letter said.
Vodafone's Gent said Esser made clear in the letter that any
new approach would be ``unacceptable.'
``If someone writes to say they won't receive any further
offers, it's difficult to have a negotiation,' Gent said on a
conference call with analysts.
Mannesmann's first line of defense against a hostile takeover
is a company bylaw introduced in the 1970s that limits
shareholders to 5 percent of the voting rights regardless of their
equity stakes.
Hurdles to Jump
Gent said Tuesday he expects Vodafone to overcome this
hurdle, because the rule is only valid until next June, and any
transaction may take that long to close.
German law also stipulates that a shareholder needs more than
75 percent of voting rights to win management control.
Still, Gent said earlier this week he only needs 50.1 percent
of Mannesmann. That would allow Vodafone to change Mannesmann's
supervisory board and, later, its management board.
``The whole corporate landscape in Europe has changed
today,' said Jacques-Antoine Bretteil, fund manager at
International Capital Gestion, which oversees $700 million. ``It
has happened in the U.S., now it's happening here.'
Vodafone's quest for Mannesmann comes just months after the
U.K. company paid $74.4 billion for AirTouch Communications Inc.
to become the leading wireless services provider.
MCI WorldCom Inc.'s pending $131.6 billion takeover of Sprint
Corp. is currently the world's biggest acquisition.
Phone services are now Mannesmann's fastest-growing business,
accounting for more than one-third of sales and two-thirds of
operating profit.
Orange Trigger
The German company's acquisition of Orange Plc, the U.K.'s
third-largest mobile phone company, from Hong Kong's Hutchison
Whampoa Ltd., will make it Europe's top wireless company, a threat
that sparked Vodafone's takeover approach. Although Vodafone is
the world's largest mobile phone company by subscribers, it
doesn't dominate Europe, trailing the likes of Telecom Italia
Mobile SpA.
A successful takeover of Mannesmann would give Vodafone
control of two of Europe's three largest mobile companies,
strengthening a network that stretches from Sweden to Greece.
Failure may cost it the ventures it already has with Mannesmann in
Germany, Italy and France.
Mannesmann shareholders would own 47.2 percent of a combined
company, which would have 42 million mobile phone customers
worldwide. Shares of the new company would be listed in London and
Frankfurt.
A takeover would dilute Vodafone earnings before interest,
taxes, depreciation and amortization by ``just under' 10 percent
in the first year, Gent said. Even so, the U.K. company said it
intends to maintain its ``A' credit rating.
No Job Cuts
The U.K. company said Mannesmann management will be offered
senior positions in a combined company and said it sees no job
cuts as a result of a takeover.
That still may not be enough to convince German unions to
back the takeover. IG Metall, Germany's largest union, said
thousands of workers at Mannesmann's mobile phone and steel units
in Dusseldorf plan to protest against the plan.
Vodafone said it would sell shares in Mannesmann's auto and
engineering units as part of a takeover. It would also separate
and relist shares of Orange. Disposal of Orange would be necessary
to allay U.K. competition concerns.
Goldman Sachs Group Inc. and Warburg Dillon Read are advising
Vodafone. Mannesmann's advisers are Morgan Stanley Dean Witter &
Co., Merrill Lynch & Co., Deutsche Bank AG and J.P. Morgan & Co. |
