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Friday, November 19, 1999 Published at 08:31 GMT


Business: The Company File

Vodafone's £79bn merger bid

Vodafone Airtouch says the merger will create a mobile telecoms giant

UK mobile phone group Vodafone Airtouch has launched a £79bn (124bn euro) bid for German group Mannesmann, in what is set to be the world's biggest ever contested takeover battle.


BBC News' Richard Griffiths reports on how German companies avoid takeovers
The bid values Mannesmann shares at 240 euros, and if successful would result in Mannesmann shareholders owning 47% of the combined group.

The offer represents a 20% increase on Vodafone's initial bid, but Vodafone may still be facing rejection as hostile takeovers are practically unknown in Germany.

The Mannesmann supervisory board is due to meet later on Friday to consider the bid.


[ image: Mobile phone ownership is growing rapidly]
Mobile phone ownership is growing rapidly
Vodafone, the biggest company on the London stock market, is eager to expand further into Europe as the mobile phone market continues to grow rapidly.

Mannesmann operates mobile phone companies in Germany and France, and has also bid £20bn for the UK's mobile phone operator Orange.

A merger would create a company with mobile phone interests in 15 European countries with 30 million customers. Worldwide the group would have the equivalent of 42 million customers.

Vodafone said that it would split off Mannesmann's engineering and automotive operations into a separate company.

Orange would also have to be sold off as part of any deal to avoid competition problems.

Delaying action blocked

Mannesmann lost its bid to derail the takeover when the High Court ruled on Thursday that US investment bank Goldman Sachs could work on the Vodafone bid.


[ image: Vodafone's Chris Gent says the two companies belong together]
Vodafone's Chris Gent says the two companies belong together
Mannesmann had complained that the bankers had access to confidential information about the group's financial state, having acted for the group in the past, and it should not be allowed to act for Vodafone.

Goldman Sachs had advised Orange over its deal to merge with Mannesmann last month.

Friendly merger rejected

Vodafone's first offer for the business, which valued Mannesmann at £65bn, was rejected by the German company on Sunday.

Vodafone spelt out the reasons behind its attempt to buy the German company as it unveiled a 113% rise in underlying half-year profits earlier this week.

It said the offer would create an unmatched European mobile phone network, and a global brand.

Vodafone said the merger would generated savings of more than £1bn by 2004, but that there would be no redundancies.

Chris Gent, chief executive of Vodafone said: "The wireless businesses of Mannesmann and Vodafone AirTouch belong together - we have been working together for many years and are natural partners in Europe."

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

"Furthermore, Mannesmann does not consider a combination with Vodafone AirTouch as strategically attractive," it said in a statement after rejecting the first bid.

Takeover frenzy

The European telecoms market has seen a frenzy of speculative takeovers in the last few months. As well as Mannesmann's move on Orange, Deutsche Telekom bought the UK's One-2-One mobile network and a French telecom company. French and American companies are also reportedly on the lookout for takeover targets.

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

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

This week Vodafone reported pre-tax profits up 113% to £879m ($1.42bn), excluding one-off items.





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