Vodafone faces pounds 400m bill as it posts bid for Mannesmann

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The Independent Online
VODAFONE AIRTOUCH is paying advisory fees totalling pounds 400m in relation to its record-breaking hostile bid for Mannesmann, the German telecoms and engineering group, and the merger of its US mobile operations with those of Bell Atlantic.

The huge scale of the fees, the largest ever for a bid launched from the UK, emerged yesterday as Vodafone posted its formal offer document to Mannesmann shareholders, firing the starting gun on a 46-day bid period.

Vodafone declined to provide a break-down of the pounds 400m in fees. However, it is understood that the vast bulk relate to investment banking and other advice on the pounds 83bn Mannesmann bid. Its two principal advisers are Goldman Sachs and Warburg Dillon Read. Its lawyers are Linklaters and its accountants are Deloitte & Touche.

The 46-page offer document also reveals that extensive contacts had taken place between Vodafone and Mannesmann months before the hostile bid was launched.

They began last January when Klaus Esser, the Mannesmann chief executive, telephoned Chris Gent, his Vodafone counterpart, to ask whether he was planning a bid. Subsequent talks concerned the potential for the two companies taking cross-shareholdings. They only broke off in October when Mr Esser telephoned Mr Gent to cancel a planned meeting because he had already agreed to make an offer for Orange.

Yesterday, meanwhile, Mr Gent urged Mannesmann to engage in talks and offered seats on the proposed enlarged company's board. "We would certainly envisage bringing on representatives of Mannesmann to our board," he said.

Mr Gent also kept the door open for Mr Esser. "So far as Dr Esser is concerned, it's a matter for him. Certainly an opportunity for him to participate remains open."

The Vodafone chief defended the nature of the bid approach. "This is not hostile as hostile takeovers used to be. This is not (about) factory closing, job cuts. It is about being part of a global group with enhanced prospects for Mannesmann and Mannesmann shareholders."

He also defended his own role, which has been under attack in the German media. "As you can see, I'm not a ruthless shark," he told a press conference in Mannesmann's home town of Dusseldorf.

Last night, Mannesmann reiterated its opposition to Vodafone. "Mannesmann regrets that Vodafone's management has decided to deliver its hostile approach on Christmas Eve without adding anything of substance to its original, unsatisfactory offer."

It said the value of Vodafone's all-paper 53.7 share bid was worth 13 per cent less than when the offer was launched in November. Since then, Mannesmann claimed its shares have matched the 25 per cent rise in the Dow Jones Stoxx European telecoms index, while Vodafone stock had risen by just 12 per cent.

Sources said the offer "glossed over" how Vodafone would separate Orange out of Mannesmann, a regulatory necessity since one company is not allowed to own two UK mobile licences. They suggested Vodafone, should it win only a slender majority approval, would have to pay up to pounds 26bn in cash to Mannesmann shareholders to take full control of Orange before demerging it.

Should Vodafone's offer succeed, it has proposed to set up a separate listing on the Frankfurt stock exchange. However, it emerged that Mannesmann shareholders who wish to repatriate Vodafone stock, whether to the US or Germany, will face a 1.5 per cent stamp tax charge that could cost pension funds hundreds of millions of pounds.

Vodafone stock closed up 9p at 305.75p, while Mannesmann ended at 237.8 euros, up 3.8 euros. That leaves Mannesmann stock about 9 per cent below the current bid value of 263 euros per share. Mr Gent said the narrowing of the gap showed the market expected the bid to succeed.

Outlook, page 13


January, 1999: Mannesmann's chief executive, Klaus Esser, telephones Vodafone's chief executive, Chris Gent, to ask whether it is planning a takeover bid.

6 May, 1999: Gent and Esser meet in Dusseldorf to discuss co-operation, including the potential for cross-shareholdings.

25 May, 1999: Vodafone executives and members of Mannesmann management board meet to discuss partnership interests.

8 September, 1999: Senior Vodafone and Mannesmann executives meet. Gent telephones Esser to ask about Mannesmann's bid for Orange and suggest a "more constructive route" for the two companies.

20 October, 1999: Gent and Esser agree to meet to discuss "co-operative" ways forward. Esser later cancels meeting after signing deal to buy Orange.

22 October, 1999: Gent hires Goldman Sachs and Warburg Dillon Read to act as advisers on a bid for Mannesmann

14 November, 1999: Gent meets Esser in Dusseldorf and sets out the case for a merger. Esser rejects the advance and files High Court injunction seeking to prevent Goldman Sachs from acting as adviser.

19 November, 1999: Vodafone launches pounds 79bn all-share offer. Mannesmann management board rejects it.

28 November, 1999: Mannesmann supervisory board also rejects the bid.

23 December, 1999: Vodafone issues formal offer document, starting the clock on 45-day bid.

7 February 2000: Vodafone offer closes.