Vodafone Mannesmann Case

rP

os

t

9-201-096

REV: AUGUST 22, 2003

SIMI KEDIA

Vodafone AirTouch's Bid for Mannesmann

op

yo

On December 17, 1999, the board of Vodafone AirTouch convened to review the company’s

decision to launch a formal hostile bida for Mannesmann, the German telecommunications company.

Several days prior, Mannesmann had rejected a friendly offer from Vodafone. At stake for Vodafone

and Mannesmann was the dominance of the European and world telecommunications market. In the

rapidly growing and consolidating telecommunications industry, the two companies were competing

to be one of the top four to five operators in the world. If Vodafone AirTouch succeeded in acquiring

Mannesmann, the resulting company would be the global leader in the industry, with operations in

25 countries and 42 million equity subscribers.b

tC

However, this was not going to be easy. If successful, Vodafone’s hostile bid for Mannesmann

would be the largest hostile takeover in the world, as well as the first ever successful foreign hostile

takeover in Germany. Besides, Vodafone and Mannesmann had reached very different

determinations of Mannesmann’s value. Vodafone AirTouch’s initial offer valued Mannesmann at

€138 billion i.e., €266 per share based on prices on December 17. This price was a premium of 14%

over the Mannesmann price that day and a premium of 72.2% over Mannesmann’s closing price on

October 18.c Mannesmann rejected this offer, which stipulated an exchange of 53.7 Vodafone shares

for every Mannesmann share, on the grounds that it was inadequate. Mannesmann claimed, instead,

that its value was close to €350 per share. This was despite the fact that Mannesmann had offered

shares at around €157.8 only a few weeks earlier in connection with its latest acquisition.

No

The Global Cellular Industry

The telecommunications industry was broadly defined to include the transmission of a wide

range of information, from traditional phone-to-phone...