As fund managers began to worry about being underweight in Vodafone stock should an agreed deal with Mannesmann emerge, its shares leapt 20.75p to 300.25p. That made the UK company's offer for the German telecoms and engineering giant worth just over 250 euros per share, against its initial bid of 240 euros. Mannesmann stock followed suit, adding 15.5 euros to close at 203 euros.
Analysts said the 23 per cent discount to the offer's implied value reflected investor fears that Vodafone could still be thwarted. "There will be a substantial shortage of Vodafone stock following a successful bid for Mannesmann," according to a note published by one broker. "This shortage is likely to force up the Vodafone share price post-offer to above 300p."
Although analysts do not discount the difficulties Vodafone faces in securing Mannesmann, optimism that it will triumph is rising in the City. "We now know the scale of German resistance," said James Ross, analyst at ABN Amro. "It's an uphill struggle, but we see Vodafone succeeding."
However, that optimism contrasted sharply with sentiment in the Mannesmann camp last night. Sources close to the Dusseldorf-based company insisted that nothing should be read into remarks by Klaus Esser, the Mannesmann chief executive, reported in the German press, where he said he had not ruled out a "friendly solution" between the companies, should the UK group make an "acceptable" offer.
"Some people walk away from that thinking he's more conciliatory, but I see no sign of that," said a source. "The position remains unchanged. If you were Esser and you really did feel conciliatory, you would pick up the phone and call [Vodafone chief executive Chris] Gent. He's not doing that."
The rebound in both companies' stocks follows several volatile trading sessions, and comes ahead of Mr Esser's expected arrival in London next week to launch Mannesmann's defence before fund managers and bondholders. He is also expected to hold briefings in Frankfurt and New York.
Mr Esser and financial advisors, including JP Morgan, Deutsche Bank, Morgan Stanley and Merrill Lynch, are huddled in Dusseldorf putting the finishing touches on their case. The presentation is to be previewed at the company's supervisory board meeting scheduled for Sunday.