ANALYSIS-Orange holds key to Vodafone bid agreement
By Kirstin Ridley, European telecoms correspondent
FWIW, I'd be unhappy with any deal at this point that was better than what has already been offered
LONDON, Feb 1 (Reuters) - The key to a friendly takeover of Germany's Mannesmann by Britain's Vodafone AirTouch Plc (quote from Yahoo! UK & Ireland: VOD.L) may lie with Orange, Vodafone's domestic arch-rival whose purchase last year sparked the record hostile bid.
With just six days to go before Vodafone's historic 163 billion euro ($158 billion) bid closes at 2300 GMT on February 7, time is running short for the British and German camps to find a compromise that would prompt a Mannesmann recommendation.
While concessions have been mooted on both sides in an attempt to forge agreement, both Mannesmann and Vodafone -- the world's biggest cellphone group -- insist they remain far apart and that the hostile bid is likely to be fought to the wire.
But market experts said on Tuesday that Orange -- whose takeover by Mannesmann last October confirmed Vodafone's fears that its former German partner was setting out its own European agenda -- might provide a solution.
``There could be a disproportionate demerger of Orange, by giving more than 50 percent of Orange to Mannesmann shareholders,' said one. ``That would be an interesting and elegant solution.'
Such a deal would also involve the British predator offering Mannesmann shareholders a 50 percent share of the combined group -- rather than the 47.2 percent on the table now. Mannesmann has been holding out for a minimum of 52 percent.
Vodafone's Chief Executive Chris Gent has already said he may offer 48.9 percent in return for a recommendation, and speculation is mounting he could offer up to 49.9 percent to clinch an agreed deal that would secure his future in Europe.
But sources close to talks said no formal offer of 49.9 percent had been made, and a Mannesmann spokesman insisted the group's shareholders would have to receive ``significantly more' than 50 percent before the Vodafone bid could be recommended.
Nevertheless, shareholders agreed that such a deal -- which would give Vodafone shareholders less of the value from an Orange demerger -- sounded feasible. But it may also fall foul of takeover rules that demand equal treatment for all investors.
Investors said dividing the combined Vodafone/Mannesmann straight down the middle had been the most obvious solution from the start, and one which both sides were now edging towards.
``It probably should have been 50/50 from day one,' noted Michael Nicol, European investment manager at Edinburgh-based Scottish Value Management, who holds shares in both companies.
``That would have been acceptable,' he added, saying the case for a Vodafone bid was nevertheless compelling.
VODAFONE VICTORY HOPES SEND SHARES SURGING
Market hopes that Vodafone was set to clinch the bid propelled shares in both companies to record highs, valuing the bid at just over 100 billion pounds ($161.3 billion) for the first time at one stage.
Mannesmann shares leapt to flirt with a high of 302.5 euros before slipping back to trade at 291.6 euros, up four percent by 1200 GMT. The price pitches the stock around 10 percent below the offer price, valued on Tuesday at about 322 euros.
Vodafone became the strongest performer in the top FTSE 100 index as its shares touched 370p before stabilising at 360-1/2p, a rise of 6.4 percent.
A combined Vodafone/Mannesmann would be largest company in Britain and analysts said tracking funds were buying in to avoid being caught short of stock.
But market sources said there had also been selling of Vodafone by arbitrageurs putting their money on a win for the British-based company by taking a short position in the stock and buying Mannesmann to take advantage of the current discount between the share price and the offer on the table.
``Vodafone seems to be edging inexorably closer to victory and we have seen some lines of stock in other companies on offer as people raise the money to put into Vodafone,' said one equity salesman.
Vodafone has said it would demerge Orange after a successful Mannesmann takeover -- mainly because European competition rules prevent it from holding two UK mobile phone companies.
But few analysts believe Orange, Britain's youngest and innovative cellphone company, will remain independent for long.
Vodafone has already said it has received interest from potential purchasers, and analysts are tipping the likes of France Telecom , Dutch carrier KPN and U.S. buyers such as SBC Communications (NYSE:SBC - news), MCI WorldCom (NasdaqNM:WCOM - news) and Bell Atlantic (NYSE:BEL - news).
(Additional reporting by Alexander Smith)
($1=1.031 Euro)
($1 equals .6200 Pound) |
