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Mannesmann rejects bid
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November 15, 1999: 3:00 a.m. ET
Mannesmann describes Vodafone's $106B offer as 'unattractive'
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NEW YORK (CNNfn) - British cellphone giant Vodafone AirTouch said Sunday it was too soon to say what its next move would be after Germany's Mannesmann rejected its 65.5 billion pound ($106 billion) bid.
But Vodafone, whose Chief Executive Chris Gent returned to London after talks in Germany with Mannesmann, is expected to come back with a hostile takeover in a bid to create the world's biggest telecoms company by market value.
Telecommunications and engineering company Mannesmann said Sunday that it had turned down a Vodafone share exchange offer in which Vodafone proposed swapping 43.7 of its shares for a single Mannesmann share. That would value Mannesmann at around 203 euros ($208.8) per share, or around 100 billion euros ($106 billion) -- toward the bottom-end of analyst expectations.
Mannesmann described the proposed deal as "financially extremely unattractive." Vodafone's bid did not contain a cash offer and was unattractive to Mannesmann shareholders, the Germany-based group said in a statement.
In addition to spurning the proposed takeover, Mannesmann said a link-up with Vodafone, the world's biggest mobile telephone operator, was not desirable from a strategic point of view.
Mannesmann also warned that the unsolicited bid jeopardized the basis of its joint ventures and cooperation agreements with Vodafone.
"This unsolicited offer jeopardizes the value and principles of our joint ventures and our contractual agreements," Mannesmann said.
Mannesmann's rejection of Vodafone's bid could trigger the biggest hostile takeover in history.
The start of a war
Vodafone was spurred into launching a bid after its German competitor swept into the British-based company's home turf with a bid for Vodafone's domestic rival Orange last month.
Mannesmann said in its brief statement that its growth prospects could be dented by accepting Vodafone's offer and forecast a rosy outlook as a result of its planned takeover of Orange.
A combination of Vodafone AirTouch and Mannesmann would create Europe's most valuable company, with a market value estimated at $257 billion.
The Vodafone approach for Mannesmann has been widely expected for several weeks, ever since Mannesmann made a surprise pounce on Vodafone's British cellular rival Orange. Mannesmann's $36 billion takeover of Orange is in the process of being completed. Vodafone gave its first hint Friday that it may strike for Mannesmann, when it issued a statement, saying: it was considering "possible ways to develop Vodafone AirTouch's long-standing relationship with Mannesmann".
The Sunday Telegraph reported Sunday that Vodafone may not be the only bidder for Germany's second-largest cellular operator.
Four potential white knights
The newspaper said Mannesmann has been approached by four potential white knights, keen to prevent the company falling into Vodafone's clutches. The newspaper identified British Telecom (BT) and Bell Atlantic (BEL) as the latest to have approached Mannesmann, with MCI WorldCom (WCOM) and SBC Communications (SBC) also indicating their interest.
A BT approach would be founded on a wish to boost its presence in continental Europe, and would give the combined company a major stake in French cellular giant Cegetel.
A spokeswoman for BT refused to comment on the report.
Bell Atlantic, Vodafone's partner in the United States, is reported to be worried about the dominant position the enlarged Vodafone would have in the European market.
The Sunday Times reported Sunday that Mannesmann's Esser would reject any offer worth less than 250 euros per share.
A takeover of Mannesmann would make Vodafone Europe's dominant cellular player. It already has minority holdings in Mannesmann's two most prized assets: the D2 network in Germany (35 percent-owned by Vodafone) and Italy's second-largest cellular player, Omnitel (22 percent-owned by Vodafone). Consolidating these holdings with Mannesmann's majority stakes would give Vodafone unique pan-European coverage.
Hostile takeovers in Germany remain rare, and further complicating the issue are Mannesmann's own statutes, which limit shareholders to 5 percent of the voting rights, no matter how much of the company they own. Additionally, German law requires a shareholder to control more than 75 percent of the voting rights to exercise management control of a company.
-- from staff and wire reports
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