The future's Mannesman for £19.8bn Orange

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Orange, Britain's third biggest mobile phones group, has agreed a bumper £19.8 billion takeover bid from German conglomerate Mannesmann, it said today.

Orange, Britain's third biggest mobile phones group, has agreed a bumper £19.8 billion takeover bid from German conglomerate Mannesmann, it said today.

The deal, priced far higher than the £16 billion expected by many analysts, is worth £16.29 for each Orange share.

If shareholders back the offer, Mannesmann will win a strong foothold in the UK, taking on Orange's 3.48 million customers - 17% of the market.

The German group will have one of the biggest networks in Europe, with strong positions in Germany, Italy and Britain, along with investments in France, Austria, Belgium and Switzerland.

Given Mannesmann's lack of presence in the UK, few redundancies, if any, would be expected among Orange's 6,000 British workers.

Orange's 45% shareholder, Hong Kong-based Hutchison Whampoa, has accepted the cash-and-shares offer, priced 21.6% higher than Orange's share price on Monday before talks were announced.

Shares in the takeover candidate were expected to rocket beyond yesterday's £13.82.

If the deal goes through it will leave Hutchison with around 10% of an enlarged Mannesmann group, to become the group's largest shareholder.

Hans Snook, the Orange chief executive, is expected to pick up a shares package worth £15 million as well as a role as head of Mannesmann's telecoms division.

He said: "Mannesmann's offer opens wider opportunities for Orange and its employees and greater resources to accelerate the introduction of new services and greater value for customers."

If the offer is successful, it wwill rank as the eighth biggest telecoms deal in the world and the second biggest in Europe, behind Olivetti's £21.3 billion hostile takeover of Telecom Italia earlier this year.

The bid easily eclipses the values paid recently for UK cellular group One2One, which went to Deutsche Telekom for £8.4 billion, and for E-Plus of Germany.

Recent months have also seen Vodafone buy AirTouch of the US and British Telecom take on Securicor's 40% stake in BT Cellnet.

Merger mania is being driven by the need for companies to provide global reach to their networks.

Companies feel that without a strong presence in European and US markets, they will be left behind in the race for global coverage.

Orange and other smaller companies are seen as needing major backers to continue investing heavily in technology and network expansion.

So-called Third Generation mobile technology, capable of handling high speed Internet access, is expected to launch in 2003.

The biggest companies with the most clout to invest in networks are likely to win the lucrative new licences, according to analysts.

Orange has impressed the City since its launch as the last of Britain's four providers by Hutchison Whampoa and British Aerospace in 1994.

As well as its rapid growth, the company recently won praise when regulator Oftel said it had the best-performing network of Britain's four mobile companies.

It also has interests in France, Germany, Austria, Switzerland and Belgium.

Its main sites in Britain are at Bristol, Darlington, Newcastle, Peterlee in Co Durham, Hertford and central London.