Vodafone AirTouch plc Friday launched a hostile takeover bid for Mannesmann AG after the German company flatly rejected an earlier all-stock bid of about $106 billion.
“We made a friendly approach to Mannesmann last Sunday,” said Chris Gent, Vodafone AirTouch’s chief executive officer. “That proposal was rejected and we have now received a letter from [Klaus] Esser (Mannesmann’s chief executive) making it clear he has no interest in a constructive negotiation.
“As a result we have decided to make an offer directly to Mannesmann’s shareholders,” continued Gent.
Vodafone AirTouch’s revised offer calls for Vodafone AirTouch to exchange 53.7 shares for each Mannesmann share and would give Mannesmann shareholders a 47.2-percent stake in the combined company. The offer is valued at about $128 billion.
Vodafone said a merger of the two companies would create the world’s leading international mobile carrier with 42 million proportionate customers worldwide and pops totaling about 510 million. The pair would have 30 million European customers and control four of Europe’s largest incumbent mobile carriers-D2 in Germany, Omnitel in Italy, Libertel in the Netherlands and Vodafone UK.
Vodafone AirTouch pressed forward with its friendly pursuit of Mannesmann until late last week, despite Mannesmann’s resistance to the company’s overtures. Vodafone earlier in the week outlined the strategic and commercial rationale for a merger of the two companies. Mannesmann’s response, said Vodafone AirTouch, was to urge the company to withdraw its proposals.
“We were disappointed with Mannesmann’s reaction to our proposal to merge our two companies,” said Gent. “The logic of this merger is compelling.
“The wireless businesses of Mannesmann and Vodafone AirTouch belong together-we have been working together for many years and are natural partners in Europe,” continued Gent. “Together we would be in pole position to exploit third-generation technology and the significant wireless data and Internet opportunity.”
Mannesmann appears to be staunchly opposed to combining with Vodafone, but Vodafone has an impressive track record when it comes to securing the mergers it prizes. The company last year snatched AirTouch away from suitor Bell Atlantic Corp. in a bidding war that sent a bitter Bell Atlantic home empty handed. Vodafone later smoothed Bell Atlantic’s ruffled feathers and convinced it to join its wireless interests with AirTouch’s to create one of the United States’ dominant wireless carriers.
Some analysts have been speculating for months that Vodafone AirTouch was cozying up to Mannesmann in anticipation of an eventual bid for the company and may have been stunned by Mannesmann’s bid last month to buy its rival Orange plc, the United Kingdom’s third-largest mobile operator.
If Vodafone AirTouch is successful in its bid for Mannesmann, the company will have to divest itself of the Orange assets. The company said it plans to establish an arm’s-length arrangement to hold Orange until it is able to de-merge Orange to the combined company’s shareholders.
In addition, Vodafone AirTouch said it intends to retain Mannesmann’s fixed-line interests, operating them separately from its mobile business, and to divest itself of Mannesmann’s engineering and automotive businesses through a public offering.
Mannesmann tried in vain last week to stymie Vodafone’s pursuit by attempting to prevent Goldman Sachs from advising Vodafone. The English High Court Thursday threw out Mannesmann’s request for an injunction against Vodafone and Goldman Sachs.
If successful in its bid for Mannesmann, Vodafone AirTouch would become the first company ever to acquire a German company through a hostile takeover.
Speculation circulated that Mannesmann might try to fend off a Vodafone AirTouch takeover either by throwing up legal barriers or possibly seeking out a white knight. British Telecommunications plc, MCI WorldCom Inc. and SBC Communications Inc. all have been named as potential white knights.
