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"Shareholders put their profit above the company's value"
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Friday, 11 February, 2000, 17:02 GMT
Vodafone seals Mannesmann deal

Gent and Esser - now-friendly rivals face the media

Vodafone AirTouch has finally succeeded in taking control of Mannesmann after last-minute concessions overcame the objections of the German group's board.

Mobile merger battle
The deal announced on Thursday got the official seal of approval from Mannesmann's supervisory board at a meeting in Frankfurt on Friday.

The two sides had been locked in talks for seven hours on Thursday to finalise details, having reached agreement in principle on friendly terms.

World's largest companies
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Vodafone: $365bn
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The 112bn ($183bn) all-share deal is the largest corporate merger in history.

It brings to an end months of rancorous negotiations, claims and counterclaims in a bidding battle mixing big business, politics and union uproar.

The new company - which will have some 42 million customers - will be run from Vodafone's Newbury headquarters, although Mannesmann will continue to have a head office in Dusseldorf.

Chris Gent Chris Gent will head the new company
As control of Mannesmann is passing to the UK, the German group will be delisted from Frankfurt's Xetra Dax share index.

The total value of the Vodafone group on the stock market, after paying $183bn for Mannesmann in shares, will be $365bn (228bn), making it by far the largest company on the London stock market and the fourth-largest in the world.

Its value reflects the bright prospects for the growth of mobile phone ownership around the world - and the huge boost provided by internet services soon being available via mobiles.

As the biggest mobile phone company in the world, the combined Vodafone/Mannesmann group will galvanise rival companies into plotting their own link-ups to be able to compete in the global market.


Vodafone consumers are likely to see little immediate difference, although the company says that it will have more money for investment in the next generation of mobiles.

However, Orange, which was bought last year by Mannesmann, will have to be put up for sale to satisfy competition regulators in the UK.

The deal also signals a more aggressive merger climate in Europe, where business has traditionally been conducted on a more co-operative basis than in Britain or the US.

It was welcomed by Prime Minister Tony Blair and, more reluctantly, by German Chancellor Gerhard Schroeder, who had initially criticised the hostile bid.

Mr Blair's spoeksman said: "The Prime Minister welcomes the proposed merger as very good news and a demonstration of how Britain can be a world leader in the knowledge-driven economy."

High stakes

Vodafone's agreed offer gives Mannesmann shareholders a 49.5% stake in the new business, short of the majority control that Mannesman chairman Klaus Esser had sought earlier.

Mannesmann shareholders will be given 58.964 Vodafone shares for each stock they hold in the German group, a 5bn increase on the original offer of 53.7 shares.

Mr Esser had previously argued that the British company's offers grossly undervalued the German company.

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Vodafone-Mannesmann: $183bn
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But now the German chairman is recommending the agreed deal to the company's shareholders.

The new company will be called Vodafone Airtouch, although the Mannesmann name will be retained in Germany.

Hostile takeover bids are extremely rare in Germany, and the 11th-hour agreement allows Mannesmann to point to this as a friendly merger. But the company earlier had been fiercely opposed to the deal.

Vodafone immediately announced that it was looking for other acquistions, especially in Asia. It is already trying to buy Spain's Airtel mobile phone company.

It says it is also talking to other internet companies about possible alliances, and may talk to content providers such as News Corporation, owners of the Sun, the Times, and BSkyB.

Last-minute talks

Vodafone's Chris Gent will head the company, while, contrary to expectations, Klaus Esser will stay on as an executive director to help with the transition.

Klaus Esser will stay to help transition
A Vodafone spokesman said: "They are two strong businesses and together we can go from strength to strength."

Savings from combining the two companies are estimated to total at least 500m, with a minimal impact on jobs as the pair have few overlaps in their businesses.

There were mass protests among Mannesmann's German workers when the takeover bid was first announced - but Vodafone has now said there will be no job losses in Germany.

The uproar created by a foreign company trying to snap up one of the best-known German companies even led to German politicians protesting against the takeover.

Vodafone said it had decided to launch the attack on Mannesmann after the German company bought Orange.

According to Mr Gent, this deal - which was seen as a defensive move by Mannesmann - contravened a gentleman's agreement not to compete on each other's territory.

The European Commission has said it will be scrutinising the deal for monopoly implications, and will make a statement 17 February.

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See also:
04 Feb 00 |  Business
Newbury backs a winner
04 Feb 00 |  Business
The giants who move markets
04 Feb 00 |  UK
What the Vodafone deal means to you
04 Feb 00 |  Business
Deal puts pressure on rivals
04 Feb 00 |  Business
Mannesmann: a culture shock
03 Feb 00 |  Business
Vodafone's Gent - the smooth operator
21 Jan 00 |  Business
Profile: Mannesmann - turning pipes into phones
18 Jan 00 |  Business
Vodafone UK's biggest company
17 Jan 00 |  Business
Do mergers ever work?
09 Dec 99 |  Business
The mobile internet race

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