C
A number of inconclusive thoughts:
The tenor of recent articles posted here on SI seems to portend a friendly merger may be in the works.
This seems to be one possibility but this changes on a daily basis. Many mergers are solidified over the weekend. The Mannesmann supervisory board meets Sunday. Hoping a deal gets done over the weekend.
My fear is that Gent will end up paying entirely too much for Mannesmann, and if significant cash is involved, it might put a serious crimp in VOD's cash flow (because of the interest on debt).
Even though I am 100% for this merger no fool am I. Yes, this has been a concern of mine as well. They way I rationalize this is in two ways. The Vod management is top notch. The only misstep it has made since the days they were Racal Telecom was not going after Mannesmann sooner. They were caught with their pants down as one analyst put it. Vod has run the scenarios I trust Vod management thinks it is paying within reason. To second this rationalization the incorporated Airtouch management team must seem to think Mannesmann is well worth the price. Together, in my mind, if the Vod and Ati people seem to think it is the best move I conclude it must be. Who knows the cellular business better than Vodafone and Airtouch? Visionaries in both companies.
Germany, Italy, and France are fast growing dominant European markets. If a merger goes through Vod-Ati own majority controls in Germany and Italy and a near control in France. I suspect that since cellular is a cash cow this deal pays for itself over time in I would venture to say Germany and Italy alone. On top of that throw in wireless internet and data access / third generation licenses and a newly formed Vod-Ati-Mannesmann may be a gold mine. What looks expensive today may look cheap in in a few years. A Mannesmann acquisition solidifies Euorpe for Vod-Ati without Mannesmann other companies will buy these companies down the road.
Lehman Brothers, cited in today's WSJ, has a breakdown of the value of Mannesmann to Vodafone. Vodafone is bidding $233 per share at the moment Lehman estimates it is worth $283 per share to Vod as of December 31, 2000. I cite Lehman Brothers because their coverage of Vodafone has been extremely accurate over the years. (Serious Vod dilution occurs in the $250 range).
As a result, the company may grow significantly, but VOD shareholders may see significant erosion in the value of their holdings.
Short-term there will be dilution long-term shareholders will be even wealthier. Vod-Ati has done one thing consistently over the years and that is PROFITABLY EXECUTE I believe this will continue and this is another reason I am not overly concerned about an overpayment. The overpayment will take care of itself as the company stays focused.
Lastly, what choice does Vod have. Mannesmann is more valuable to them than to anyone else and if there is no merger another major competitor to Vod may emerge in Europe.
MGJ
P.S. Since I am a believer this merger will eventually go through I bought Mannesmann this afternoon. The 30% discount between the price of Mannesmann and the Vod bid was to tempting to pass up. |
