Vodafone investors see cash wooing Mannesmann
By Alexander Smith and Kirstin Ridley
LONDON, Nov 24 (Reuters) - Institutional investors in mobile phone giant Vodafone AirTouch Plc (quote from Yahoo! UK & Ireland: VOD.L) said on Wednesday they would back a raised bid for Germany's Mannesmann as speculation mounted that a cash sweetener might clinch a deal.
Vodafone, which is seeking to secure its future in Europe, has seen the value of its historic 124 billion euro ($126.8 billion), 240 euros per share all-stock bid fall to 238 euros as its shares have softened in the wake of Mannesmann's rebuttal.
But while the British-based group insists that its offer is final, some investors believe the world's biggest mobile phone company is under mounting pressure to win over Mannesmann AG and secure lucrative joint ventures in Germany, Italy and France.
``I wouldn't mind it if they raised the bid to get agreement from Mannesmann,' said one institutional shareholder with holdings in both groups. ``They already have a foot in the door.'
``They might only need to pay around 10 euros per share in cash. I'd like to think a little more would swing it. They are two strong groups. But they would be stronger together.'
Another institutional investor with holdings in both groups said 240 euros per share was a fair price for Mannesmann, but added that he would support a further cash element to the bid.
``As we said to Vodafone, it's not a scenario where we would back almost any offer,' he said. ``I think we would have to get back together with them and go through the numbers. But a small cash element, I think, would be acceptable.'
But he is not yet encouraging Vodafone to raise the stakes in a bid battle he believes they could still win.
Uncertainty about the bid outcome has also weighed on Mannesmann's shares, which were trading at a steep 27 percent discount to the bid at 187 euros on Tuesday. Vodafone ended around 1.5 percent higher at 277 pence.
``At the end of the day, Mannesmann's shares are going to be back at 160 euros (without Vodafone),' another fund manager said. ``And if Vodafone gets them, they will probably go up.'
HOSTILITIES SEEN AS COUNTER-PRODUCTIVE
Vodafone is already seeking a record loan of around 23 billion pounds ($37.18 billion) to back its Mannesmann bid. A cash sweetener of 10 euros per share could send Vodafone back to the banks for a further 4.0 billion euros.
Institutional investors have said they would accept a bid of around 250 euros per share, which would dilute earnings for around two years, in return for a successful takeover of one of Europe's most dynamic telecoms companies.
Some financiers suggest that the world's largest hostile takeover attempt will be damaging for both sides in a prolonged and bitter bid battle, and think that while ambitious Mannesmann Chief Executive Klaus Esser will remain opposed to a deal to the bitter end, his board may be won over.
``If this remains trench warfare for the hearts and minds of investors, it will take months to resolve,' noted one.
Vodafone's Chief Executive Chris Gent, who is on a mission to charm German institutions, a sceptical press, politicians and a wary public, told a German weekly that both the European firms could face a U.S. takeover if they did not merge.
``...one day U.S. telephone companies will come into the European mobile phone market and swallow us both up,' he told the Wirtschaftswoche. ``Together with Mannesmann, we have the chance to sit at the top of the market.'
Few experts now believe Esser, who will unveil a defence within 14 days after Vodafone's offer document has been sent to shareholders next month, has any surprises up his sleeve.
Esser has said he will fight for Mannesmann's independence without the help of any white knight counterbidder, and is expected instead to focus on its high growth businesses and a share price with growth that has outstripped that of Vodafone.
``If anyone expects Esser to pull a rabbit out of a hat, I'm not sure there is one,' noted one industry source |
