Mannesmann set to capture Orange with £18bn cash and stock offer

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The Independent Online

Mannesmann, the German industrial and telecoms group, was poised last night to secure an agreed £18bn takeover of Orange, Britain's number three mobile phone company.

Mannesmann, the German industrial and telecoms group, was poised last night to secure an agreed £18bn takeover of Orange, Britain's number three mobile phone company.

It would mark the fourth time in two months that a British phone company has fallen to an overseas buyer. It would also leave a gaping hole in the European strategy of Vodafone AirTouch, which has minority interests in Mannesmann-controlled mobile companies in Italy and Germany.

Mannesmann is understood to have secured the support of Hutchison Whampoa, the Hong Kong conglomerate, for its bid, which values Orange at more than £15 per share. The deal is expected to offer Orange shareholders a mix-and-match share and cash alternative.

Hutchison, which owns a 45 per cent interest in Orange, is expected to opt for the maximum amount of Mannesmann shares it can obtain under the mix-and-match formula. That would likely see the Hong Kong company become Mannesmann's biggest shareholder with a stake of 15 per cent or more.

Orange's board is expected to recommend the offer to shareholders. Hans Snook, the Orange chief executive, is expected to become head of Mannesmann's telecoms division.

Though only a decade old, the German company has emerged as one of Europe's most dynamic and rapid growing telecoms players. Its mobile assets include D2, Germany's biggest mobile network, and a 55 per cent interest in Omnitel, the number two Italian mobile carrier. Mannesmann also owns fixed line subsidiaries in both countries, 75 per cent of Austrian carrier tele.ring and a 15 per cent stake in France's Cegetel.

Acquiring and integrating Orange, which has stakes in Swiss, Austrian and Belgian mobile networks, would give the new company 10.3 million mobile subscribers in the UK and Germany. Adding in Omnitel's 7.9 million customers would push Mannesmann ahead of Telecom Italia Mobile, Europe's biggest mobile company with 16 million customers.

That would leave UK rivals BT Cellnet, which has 6 million customers, and Vodafone, with nearly 7 million subscribers, trailing far behind in the race to establish European-wide networks. Though BT has invested more than £3bn in numerous European mobile and fixed line start-ups, it lacks management control of the ventures.

Hutchison has stressed that the Orange stake was a core holding. But analysts said the premium price for the stake - expected to be more than seven times its spring 1996 flotation - proved too tempting to resist.

It will also allow the company, whose chairman is Hong Kong billionaire Li Ka-shing, further scope to expand and deepen a mobile telephone footprint that will cover Europe, while stretching to Asia and North America. Hutchison also has telecoms interests in Israel and Australia.

In the City, Orange stock closed down 6p at 1,382p in volume of only 7.8 million shares as investors pondered whether the deal would be struck and on what terms. However, Vodafone slid 16.5p to 257p in crushing volume of 211 million shares as investors feared heavy damage to its long-term prospects.