NEW YORK (CNNfn) - German wireless communications company Mannesmann dropped its opposition Thursday to a takeover bid from Britain's Vodafone AirTouch, paving the way for the formation of Europe's largest wireless operator in the biggest-ever corporate buyout.
After three months of fending off Vodafone's unsolicited offer, which would have given Mannesmann shareholders 47.2 percent of the combined company, executives hashed out a deal on Thursday under which Mannesman shareholders will get 49.5 percent of the combined company.
The offer puts a value of 353 euros, or roughly $350, on Mannessman stock.
"Mannesmann has reached an agreement with Vodafone AirTouch which creates a path to a single company," Mannesmann said in a statement. "It is Mannesmann's assessment that this reflects the will of Mannesmann's shareholders."
Vodafone's all-stock offer, valued at roughly at $183 billion, has been improved by about 5 percent, Mannesmann said.
"We have agreed between us that Vodafone AirTouch will be making a revised proposal to Mannesman shareholders," Chris Gent, Vodafone's chief executive said in a hastily-assembled news conference at the company's Duesseldorf headquarters Thursday. He added the German group's
management board was recommending the bid.
Mannesmann's supervisory board will meet Friday to consider the deal, which is expected to be formalized Friday morning.
Throughout the hostile takeover battle, Vodafone had said it was reluctant to offer Mannesmann shareholders more than 50 percent of the new company. For its part, Mannesmann had said all along that it wouldn't accept a takeover that gives its shareholders a minority of any enlarged company.
Vodafone's pursuit of Mannesmann began with what it called a "friendly" approach, but soon turned into a bitter battle, involving a personal duel between Gent and Esser. Both companies' managers had appealed to Mannesmann's major shareholders for support in tours across Europe and the United States.
The two companies have also clashed over growth strategy Vodafone proposed shedding Mannesmann's fixed-line telecom interests, whereas the German company argued it would have better growth prospects by keeping all its telephone activities.
The merged company would in any case have to shed part of its combined U.K. mobile-phone businesses: antitrust authorities have said they would not allow the company to own both Orange, Britain's third-largest cellphone operator, which Mannesmann bought last year, and Vodafone's own market-leading U.K. mobile business.
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It was the $36 billion purchase of Orange that sparked Vodafone's pursuit of Mannesmann. Prior to that the two companies were partners, jointly owning Germany's largest cellular operator D2, and Italy's second most popular cellular firm, Omnitel.
A combined Vodafone/Mannesmann would have 31 million cellular subscribers in Europe and 42 million in total. It would have a market value of about 338 billion euros, far ahead of Europe's current number one, Finnish cellular-phone manufacturer Nokia, which is valued at 220 billion euros.
Vodafone AirTouch was formed last year when the U.K.'s Vodafone bought California-based cellular operator AirTouch Communications for about $60 billion, outbidding Bell Atlantic and putting itself into second place in the U.S. mobile-phone market, behind AT&T Wireless.
Mannesmann transformed itself during the 1990s from an industrial manufacturer making steel pipes, auto components and materials-handling equipment into Europe's biggest mobile-phone operator. Rapid growth in its telecom activities means this side of the company now accounts for the vast bulk of its total value. Mannesmann last year announced plans to spin off the manufacturing business, allowing it the freedom to grow by itself.
Observers had speculation that, if the deal were approved, Mannesmann chief executive Klaus Esser would leave the company, paying the price for his vehement opposition to Vodafone's unwanted advances. On Thursday, executives said he would stay on for several months after a deal is consummated to help with the transition and then become a non-executive deputy chairman.
Either way, Esser, who is credited with creating one of Europe's most dynamic telecommunications companies, has come through the three-month battle saving face, according David Stevenson, investment manager at Scottish Value Management, which holds stakes in both companies.
He may not have gotten any additional cash for his investors, but he did squeeze out a few extra shares, he said.
"If you create shareholder value, then you are remembered for it," Stevenson said. "Esser gave 350 euros as his target and managed to talk up that value and won a few more percent. He gets credit for that."
-- from staff and wire reports