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$36B Orange consumed
October 21, 1999: 7:43 p.m. ET

Mannesmann to buy UK cellular firm; Vodafone, Hutchinson likely to react
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LONDON (CNNfn) - Germany's Mannesmann cemented a $36 billion takeover of the U.K. cellular firm Orange Thursday, a move likely to provoke more deals among European telecom players.
     Mannesmann will pay 19.8 billion pounds ($32.8 billion) in cash and stock, and plans to absorb $3.2 billion of Orange's debt.
     Mannesmann's offer is worth 16.29 pounds per Orange share, a 22 percent premium over Orange's closing price Monday, the last business day before Mannesmann confirmed its interest.
     Orange stock opened up nearly 9 percent higher Thursday before retreating in heavy trading volume. The company ultimately closed at 1,447 pence, up 65 pence or 4.5 percent.
     Analysts said the offer is unlikely to be challenged by a counter-bid, despite earlier speculation of an auction for the U.K.'s third-largest cellular operator.
     "The premium looks sufficient," commented analyst Andrew Moffatt of ABN Amro, "especially as France Telecom seems to have ruled itself out of bidding."
     France Telecom (PFTE) chief Michel Bon told the Financial Times Thursday that his company prefers to bid for one of the next generation of U.K. cellular licenses, UMTS, rather than buy an existing operator.
Competitors may react quickly

     Mannesmann's bold stroke seems certain, however, to stoke more takeover action in the fast-moving European and U.S. telecom sectors.
     Several analysts told that market leader Vodafone AirTouch (VOD) is bound to act, possibly by making a bid for all of Mannesmann. Mannesmann is in the process of splitting its engineering unit from its telecom division.
     "Vodafone is very likely to make a move … either for Mannesmann or for someone like Telecom Italia Mobile," said one analyst who did not wish to be named, adding, "the clock is ticking for Vodafone."
     Other analysts speculated the deal would open the door for Hong Kong conglomerate Hutchinson Whampoa Ltd. to increase its interest in U.S. mobile provider VoiceStream Wireless Corp. (VSTR).
     Hutchinson, Orange's major shareholder, stands to pocket roughly $2.82 billion in cash and an identical amount in notes from the deal.
     Analysts speculated Thursday the company would infuse a large portion of those funds into VoiceStream, a Bellvue, Wash.-based wireless provider that will boast roughly 200 million customers nationwide once pending deals with Omnipoint Corp. (OMPT) and Aerial Communications Inc. (AERL) are completed.
     "They still have some unfinished business in developing a national U.S. mobile franchise," said David Gibbons, a telecommunications analyst at HSBC Securities.
     VoiceStream shares climbed 3-1/8 to 84-1/8 in late trading Thursday.
     Following completion of the deal, Hutchinson will control roughly 10.2 percent of Mannesmann's stock. But Hutchinson chairman Li Ka-Shing sidestepped questions about whether the company would increase that stake when the German group splits off its engineering and automotive business into a separate company.
     "We will keep it for a long-term investment," he said of the stake.
Terms of the deal

     Under the terms of the offer -- 0.0965 new Mannesmann shares and 640 pence in cash -- Orange shareholders will own 23 percent of the enlarged Mannesmann.
     Orange management has recommended the offer to shareholders and Hutchison Whampoa already has agreed to accept the deal.
     Orange's top executives stand to get a hefty payout. Chief Executive Officer Hans Snook will receive a 10 million pound payment from Mannesmann and Hutchinson once the deal is completed, plus 5 million pounds depending on his performance during the integration.
     Likewise, finance director Graham Howe stands to receive an initial 5.6 million pound payout during the six-month transition period, plus 2.8 million pounds for the subsequent integration.
     Adding Orange's 3.5 million U.K. subscribers will give Mannesmann more than 20 million wireless subscribers in Europe, putting it neck-and-neck with leader Telecom Italia. Mannesmann is the largest player in Germany with its D2 network and the second-largest in Italy through its Omnitel unit.
     The Mannesmann-Orange deal marks the second acquisition of a U.K. cellular company by a German firm. Mannesmann's chief domestic rival, Deutsche Telekom (FDTE), bought fourth-placed One-2-One in a $13.6 billion deal in August.Back to top
     -- from staff and wire reports


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