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The BBC's Peter Morgan
"The deal is far from done"
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The BBC's Richard Griffiths
How German companies avoid takeovers
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Justin Urquart-Stewart
"Have they got the strength to fend this off?"
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Sunday, 21 November, 1999, 09:25 GMT
Vodafone takeover battle heats up
Vodafone Airtouch says the merger will create a mobile telecoms giant

Battlelines have been drawn in the world's largest ever takeover bid.

UK mobile phone group Vodafone Airtouch has launched a 79bn (124bn euro) bid for German group Mannesmann, which is fiercely opposing it.

Mannesmann chief executive Klaus Esser now wants to convince investors the company can offer them a better deal on its own.

"The growth prospects for the group are gigantic," he said in an interview with German magazine Der Spiegel. "Data business via mobile phones will give us a new thrust."

But already speculation exists that Mannesmann may seek a partner or alliance. Some reports suggest the company would consider merging its telecom operations with French conglomerate Vivendi in a bid to fend off the hostile bid.

Vodafone Airtouch's chief executive Chris Gent may approach Hutchison Whampoa for their support.

The Hong Kong based owner of Orange, will own 10% of Mannesmann, once it has sold the German company its 45% stake in Orange.

Political support

Mannesmann has enlisted political and union support for its defence.

German Chancellor Gerhard Schroeder told a French newspaper that "hostile takeovers destroy a company's culture."



The bid values Mannesmann shares at 240 euros, and if successful would result in Mannesmann shareholders owning 47% of the combined group.

Mobile phone ownership is growing rapidly
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.

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

Vodafone has said it will have to borrow up to 35bn euro ($40bn) to finance the bid by issuing bonds.

Shares in both companies fell on the stock market on Friday, with Mannesmann dropping 7% and Vodafone 2.2%, lowering the value of the all-share bid. The fall indicates that investors are still sceptical that Vodafone will be able to win through in its bold bid.

Growing frenzy

After all-day deliberations, the Mannesmann supervisory board postponed its special meeting to consider the bid until next week, but it has already made clear in a letter to Vodafone that it wants the company to withdraw its bid.

The German press is already campaigning against it, with leading popular paper Bild splashing its front page headline on Frida with "The Englanders are coming, with a knockout offer...will greed triumph today?"

Vodafone, the second biggest company on the London stock market, is eager to expand further into Europe as the mobile phone market continues to grow rapidly. The merger would create the world's largest telecoms company.

Mannesmann operates mobile phone companies in Germany and France, and has also succeeded with a 20bn bid 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.

But Vodafone will have to convince a large block of investors, including some important German institutions, that its ownership would add value to Mannesmann's business.

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.

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.

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



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 France Telekom bought Germany's E-plus. American companies are also reportedly on the lookout for takeover targets.

The effort to clinch a deal with Mannesmann comes less than a year after Vodafone agreed a 34bn ($65bn) merger with US group AirTouch, and three months after it created a $70bn joint venture with Bell Atlantic for its US assets

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See also:
21 Nov 99 |  Business
Blair steers clear of Vodafone hostile bid
19 Nov 99 |  The Company File
The rapid rise of Vodafone
19 Nov 99 |  The Company File
Mannesmann fights back
19 Nov 99 |  The Company File
Vodafone mounts 79bn hostile bid
29 Oct 99 |  Business Basics
Mobile phones - a growth industry
11 Oct 99 |  The Economy
Global telecoms revolution

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