Vodafone to up stake in Mannesmann

LONDON, NOV 15: Vodafone AirTouch Plc, whose 103 billion euro ($ 106 billion) bid for Mannesmann AG was rejected on Sunday, is set to rai...

LONDON, NOV 15: Vodafone AirTouch Plc, whose 103 billion euro ($ 106 billion) bid for Mannesmann AG was rejected on Sunday, is set to raise the stakes and trigger the biggest hostile takeover battle in history.

Analysts said the British mobile telephone giant, whose stock fell over three per cent in early trade, could afford to pay as much as 240-250 euros for the German telecommunications and engineering group valuing it at up to 127 billion euros.

The initial 203 euro deal was presented to Mannesmann in the German city of Duesseldorf on Sunday. Based on swapping 43.7 Vodafone shares for each Mannesmann share, it is valued at 65.5 billion pounds.

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At stake is European leadership of the rapidly growing mobile phone market. In an effort to avoid being squeezed out of prized joint ventures in Germany and Italy, analysts say Vodafone might launch a hostile bid as early as Tuesday, when it releases what are expected to be robust, half-year earnings figures. "Strategically Mannesmann is too important forVodafone to turn its back on," said Jim McCafferty of S G Securities.

"I think they could realistically go up to around 240-250 euros per share…But clearly they don’t want to overpay." John Tysoe of WestLB Panmure agreed, arguing that Vodafone could pay comfortably pay at least 230 to 240 euros if disposal proceeds and synergies were factored in. As the market braced for a battle for corporate supremacy in Europe’s mobile phone market, Mannesmann shares rallied 3.8 per cent to 192 euros, having touched another record high of 198.40 euros. Vodafone slipped 3.4 per cent to 286-3/4 pence.

The Duesseldorf-based company, which swept into Vodafone’s home turf last month with a $ 32 billion bid for Vodafone’s domestic arch rival Orange Plc, on Sunday described Vodafone’s offer as financially unattractive and strategically undesirable.

UK market leader Vodafone would have to sell Orange to satisfy competition authorities. Vodafone the world’s biggest mobile phone operator said it regretted Mannesmann’srejection of its offer but gave no indication of its next move. But analysts say Vodafone has little choice now but to launch a hostile bid to secure its position in joint ventures with Mannesmann in Germany and Italy, which the German company controls. They are also minority partners in France.

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"Mannesmann is convinced that the offer is financially extremely unattractive," the German group said in a statement after Vodafone Chief Executive Chris Gent had travelled to Germany to make an offer to Mannesmann counterpart Klaus Esser.

"We cannot recommend our shareholders to give up the growth potential belonging to them," Esser said in a statement. Mannesmann also warned that the unsolicited bid jeopardised the basis of its joint ventures and cooperation agreements with Vodafone.

Mannesmann and Vodafone are partners in Germany’s leading mobile phone group Mannesmann Mobilfunk GmbH.