Vodafone Finally Succeeds in $160 Billion Bid for Mannesmann
February 3, 2000 [New York Times Headline Article]
By ANDREW ROSS SORKIN WITH EDMUND L. ANDREWS
ONDON, Feb. 3 -- Mannesmann finally succumbed to Vodafone AirTouch P.L.C.'s $160 billion hostile bid today, negotiating a face-saving deal that the companies will call a "merger." The companies are expected to announce the deal at 4PM in Dusseldorf, executives close to the talks said. The agreement was reached at about 4AM in Dusseldorf after a marathon of intense meetings.
Mannesmann ended up getting a slightly larger stake in the combined company than Vodafone was initially willing to negotiate. Mannesmann will control 49.5 percent of the company while Vodafone will control 51.5, the executives said.
Mannesmann's supervisory board will meet this afternoon to approve the deal.
Mannesmann's chief executive, Klaus Esser, had previously insisted that he would reject any offer in which Mannesmann shareholders ended up with less than 58.5 percent of the shares in the combined company. His hand was forced, the executives said, to negotiate a friendly deal by his supervisory board. Vodafone's original offer would give them 47.2 percent, though Vodafone had offered to raise that share to about 49 percent if Mr. Esser agreed to a friendly deal. In effort to complete the deal, Vodafone gave the German conglomerate an additional .5 percent.
Last night, the companies acknowledged they were in negotiations.
"There are talks under way," Mr. Gent told a German television network, NTV, tonight.
Vodafone's shares, which rose 7 percent in London trading yesterday, to œ3.855, are now so high that its all-stock offer for Mannesmann is worth 342 euros a share, or $333.69 at current exchange rates. That is more than twice the price that Mannesmann shares traded at six months ago, and is approaching the level of 350 euros a share that Mr. Esser had said reflected the true value of his company. Mannesmann shares soared today for the third consecutive day, climbing 9.7 percent, to 325 euros.
Analysts said the surge in Mannesmann's shares price reflected a conviction by investors that Vodafone would prevail.
People close to Mannesmann say Mr. Esser is prepared to resign as chief executive and has no interest in remaining with the company if Vodafone takes control. Mr. Esser has come under intense pressure from some members of Mannesmann's supervisory board, as well as from shareholders.
Board members like Henning Schulte-Noelle, the chairman of the insurance conglomerate Allianz A.G., and J÷rgen E. Schrempp, chairman of DaimlerChrysler, have been pushing Mr. Esser to accept a friendly deal.
Mr. Esser's dwindling hopes of retaining a majority of shareholders were all but shattered on Sunday, when Vodafone negotiated a new alliance with Vivendi, the French media and utilities group.That move derailed Mr. Esser's own hopes of negotiating a merger with Vivendi, which would have given Mannesmann control of France's second-largest wireless network as well as a major stake in Canal Plus, Europe's biggest pay-television company.
Lars Berg, the head of Mannesmann's core telecommunications group, confirmed today what people close to the companies indicated more than a week ago: that Mannesmann had hoped to negotiate a full merger with Vivendi until it was outmaneuvered by Vodafone.
Had Mr. Esser been able to at least announce an agreement in principle with Vivendi, he could have laid claim to control of wireless networks available to subscribers in Europe's big markets: Germany, Italy, Britain and France. As if that were not enough, Vodafone and Vivendi also appeared poised to unravel Mr. Esser's other major defensive initiative: a major alliance with the European business of America Online.
Mr. Esser has been negotiating a deal in which he would acquire part of the 50 percent stake of Bertelsmann A.G. in AOL Europe. But yesterday, Vivendi announced that it was in talks with AOL Europe as well.
American depository receipts of Vodafone, each representing 10 shares of the British company, rose $4.125 today, or 7 percent, to $63 on the New York Stock Exchange. The recent rise in Vodafone shares suggests that many investors and analysts accept Mr. Gent's vision of the benefits that will come when his company controls Mannesmann. As a result, analysts have raised their projections for both Vodafone and Mannesmann.
Andrew Moffat, telecommunications analyst with ABN Amro in London, said Vodafone shares have received a boost from a technical side effect of a merger. If Vodafone acquires Mannesmann, its weight within the Financial Times index of 100 leading British stocks would rise to 12 percent from 6 percent, he said, adding that would produce heavy buying from investment funds that track the index.
[NY Times, February 3, 2000; headline article]
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