The holding emerged as C&W and Veba announced plans to invest about £4bn in two joint telecommunications ventures, one to attack the German market and another covering the rest of the European Union outside Germany and the UK.
Ulrich Hartmann, chairman of Veba, will join the C&W board but no reciprocal invitation has been extended to C&W'S chairman, Lord Young.
Lord Young said Veba wanted a stake to cement the strategic alliance "because that is part of the German way". "The chairman is joining our board not because of the stake but because of the man he is and because of the alliances," he said.
Veba bought its C&W shares at 395p, compared with an opening price of 378p the previous day. The offer to buy is thought to have been heavily oversubscribed. C&W shares rose to 404p at one point but fell back to close at 378p.
Veba has undertaken not to increase its stake beyond 10.5 per cent for a decade and has also said it will not pay more than 435p to acquire C&W shares over the next six months.
In the first joint venture C&W is to take a 45 per cent stake in Vebacom, Veba's telecommunications arm, joining the stampede to expoit the liberalisation of the German market. Earlier this month BT announced plans to invest £600m in a joint venture withViag, one of Germany's biggest industrial conglomerates.
The German telecommunications market is thought to be worth about £18bn in revenues and, according to C&W, is heavily under-exploited. The German government is expected to issue between one and five new public telecommunications licences in preparation for the full liberalisation of the European market on 1 January 1998.
Dr Hermann Kramer, a member of Veba's bord of management, said: "We aim to be the number one competitor to Deutsche Telekom in Germany with a market share of 10 per cent by the year 2003." He said Veba had also discussed an alliance with BT and other ompanies but had considered C&W the best partner to help Veba realise its international ambitions in telecommunications.
Veba, which employs 128,000, has traditionally concentrated on electricity, chemicals, oil and trading and transport. However it has recently been developing interests in telecommunications and cable television.
In the second joint venture, Veba will take a 50 per cent stake in C&W Europe, which will act as an umbrella for the partners existing interests in other European countries and will be a vehicle for new ventures.
The alliance met mixed reaction in the City. Some analysts questioned whether the payback on the investment would be quick enough or big enough to justify the initial outlay.