Mannesmann, Vodafone Set To Merge
Updated 5:32 PM ET February 3, 2000
By BURT HERMAN, Associated Press Writer
BERLIN (AP) - Mannesmann AG of Germany is poised to accept a sweetened
takeover bid of $180 billion from Britain's Vodafone Airtouch PLC, a deal that
would create the world's No. 1 wireless company through the biggest merger in
history.
Mannesmann head Klaus Esser, speaking Thursday alongside Vodafone chief
executive Chris Gent in their first side-by-side appearance, said he would
recommend that the company's supervisory board accept the deal at a meeting
Friday.
The breakthrough in the hostile takeover battle followed intense last-minute
negotiations between Gent and Esser in a meeting that stretched from Wednesday
night into Thursday morning.
The new offer would give Mannesmann investors close to an equal stake in the combined company, settling a major
stumbling block in the negotiations.
Mannesmann had demanded no less than a 50 percent share in the new company, but Gent as recently as Wednesday
ruled such an option out, insisting that Vodafone was much larger than Mannesmann.
"The shareholders clearly think that this company, Mannesmann, a great company, would be better together with
Vodafone Airtouch," Gent told reporters in Duesseldorf. "I look forward to coming back to Duesseldorf in the middle
of next week to have further talks with (Esser) and members of his team."
The companies had been locked in a stalemate since Nov. 14, when Mannesmann's supervisory board rejected
Vodafone's unsolicited overture.
Before the new proposal was announced, Mannesmann shareholders were facing a Monday deadline on whether to
accept a Vodafone offer worth about $165 billion.
Under the new proposal, Mannesmann shareholders would get 58.96 Vodafone shares for each of their Mannesmann
shares, giving them a combined 49.5 percent stake in the merged company.
Vodafone shareholders would hold a controlling stake with 50.5 percent of the stock in the new company, which
would be the biggest wireless communications concern in the world with market-leading operations in Europe and the
United states.
The merged company would have 42 million customers in 25 countries with an especially strong presence in Europe,
controlling the No. 1 or No. 2 position in 11 European countries with 29 million customers on the continent.
If accepted, the deal would easily eclipse both America Online's planned $135 billion merger with Time Warner and
MCI WorldCom's $115 billion deal with Sprint Corp. as the biggest corporate marriage in history
Mannesmann, which also owns a major engineering and automotive business, operates the largest mobile calling
business in Germany.
Vodafone became the world's biggest mobile phone business about a year ago by acquiring AirTouch
Communications, a major wireless operator in the western and midwestern United States. Now, Vodafone is set to
link up AirTouch with Bell Atlantic's wireless unit in a joint venture that will create the biggest U.S. wireless service.
The new company's large coverage area would make it easier for mobile phone users to take their service with them
around the globe.
The combined company also would likely play a dominant role in implementing the next generation of wireless
technology, which will allow high-speed Internet access from anywhere in the world.
In Brussels, European Union monopoly regulators said earlier Thursday they would have to review any merger
between the two companies.
"We have been looking at it since we were first notified and we will continue to look at it," said EU Commission
spokesman Michael Tscherny, adding that the Commission is expected to issue a first-phase decision on the case on
Feb. 17.
Both companies have each spent millions of dollars on media campaigns trying to persuade Mannesman's
shareholders. Each insisted it had a better strategy for a rapidly changing telecom industry - especially in Europe,
where deregulation has sparked a frenzied race to grab market share.
Hostile takeovers are almost unheard of in Germany, and politicians and labor leaders here have decried Vodafone's
attempt even though Mannesmann recently acquired Orange PLC, a Vodafone rival in Britain. If the merger goes
through, the new company would likely spin off Orange to avoid conflict with anti-monopoly laws in Britain.
Earlier this week, Vodafone took the upperhand in the battle by announcing a European Internet and telephone venture
with the French conglomerate Vivendi SA, a company Mannesmann had been trying to partner with.
Vodafone has said no jobs will be cut as a result of any merger. However, according to earlier reports,
Mannesmann's Esser would step down as part of the deal |
