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Sunday, November 14, 1999 Published at 14:22 GMT

Business: The Company File

Mannesmann rejects Vodafone bid

The German telecommunications giant Mannesmann has rejected an unsolicited takeover bid from UK phone group Vodafone AirTouch plc.

In a statement, the Dusseldorf-based group said the bid was "wholly inadequate".

Mannesmann's board said the offer did not contain a cash offer and was unattractive to shareholders.

"Furthermore, Mannesmann does no consider a combination with Vodafone AirTouch as strategically attractive," said a statement.

The announcement followed a meeting between Mannesmann chief executive Klaus Esser and Vodafone chief, Chris Gent.

There was no immediate comment from Vodafone, which now has the option of pursuing a hostile takeover attempt which could be the largest in corporate history.

£75bn bid

Vodafone offered to exchange 43.7 of its shares for each Mannesmann share with no cash added, Mannesmann said.

The Vodafone offer had been estimated to be worth up to £75bn.

Vodafone had been tipped to make an offer for Mannesmann ever since the German company announced a deal to buy UK company Orange.

[ image: Klaus Esser - may have other options]
Klaus Esser - may have other options
It would have to pay even more to win a hostile takeover, and shares in Vodafone fell 7% on Friday amid fears the company could end up over-paying.

Vodafone is due to announce its half-year financial results on Tuesday and the City expects some indication of its plans to emerge by then at the latest.

The latest frenzy of speculation over mobile phone companies began when Orange agreed to a £20bn takeover by Mannesmann in October.

The deal would add the UK to Mannesmann's existing mobile businesses in Germany, France and Italy.

Vodafone was prompted into making its own offer for Mannesmann to avoid being left out in the cold in the European mobile phone business.

Future of Orange

Its plan is thought to involve taking control of Mannesmann's mobile businesses in Europe but selling Orange, either back to investors on the stock market or to another phone company.

France Telecom has been tipped as a possible buyer.

Vodafone, already the UK's biggest mobile operator, would certainly be blocked from keeping control of Orange by competition watchdogs.

The effort to clinch a deal with Mannesmann comes less than a year after Vodafone agreed a £34bn merger with US group AirTouch in January.

Other suitors suspected

That deal turned Vodafone AirTouch into the world's biggest mobile phone company.

Vodafone trumped US group Bell Atlantic in its bid for AirTouch.

A report in The Sunday Telegraph suggested Bell Atlantic may be poised to get its revenge on Vodafone by agreeing a merger deal with Mannesmann.

The paper also said BT, owner of BT Cellnet, had made an approach to the German company.

The Observer said another US group, SBC Communications, saw Mannesmann as a "perfect fit".

This merger talk is the latest in a seemingly endless round of European telecoms consolidation.

Urge to merge

Last month, France Telecom announced plans to buy a majority stake in E-Plus, Germany's third-largest network, for $7.9bn.

When Olivetti took over Telecom Italia earlier this year, it had to sell its Italian mobile assets. Mannesmann bought them in a move which raised its presence in the European mobiles market.

Deutsche Telekom, who bought the UK's One-2-One mobile phone network earlier this year, is also looking for merger partners.

Vodafone itself, having acquired the US-based Airtouch, spun out its US assets into a joint venture with Bell Atlantic.

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