Orange chief executive to pick up £45m from Germans' takeover

Mannesmann's £18.5bn deal will leave it with more than 20 million customers

The £18.5bn agreed takeover of Orange by Mannesmann, the German industrial and telecoms conglomerate, is set to boost Hans Snook, the UK mobile phone company's chief executive, into the top echelon of corporate bosses with an incentive scheme that could top £45m.

The £18.5bn agreed takeover of Orange by Mannesmann, the German industrial and telecoms conglomerate, is set to boost Hans Snook, the UK mobile phone company's chief executive, into the top echelon of corporate bosses with an incentive scheme that could top £45m.

That would place the German born, Anglo-Canadian executive just behind Jan Leschly, Britain's highest-paid boss, who has received a long-term £90m share option package from SmithKline Beecham. But it should see Mr Snook surpass the £30m reward captured by Martin Sorrell, chief executive of the advertising agency group WPP, and the £25m received by Sam Chisholm when he stepped down from BSkyB in 1997.

"Really?", replied Mr Snook, when asked to comment on becoming Britain's second-highest paid executive. "I am surprised. To be very honest, I didn't even know what it amounted to."

Mr Snook's package is made up of four parts. He receives £14.75m in cash for foregoing Orange share options that are void due to the Mannesmann buyout. Mr Snook will also receive an immediate one-off bonus of £10m as well as a further £5m bonus in relation to the successful integration of Orange over the next 18 months.

The final part of the incentive package could see Mr Snook receive one more bonus of up to 30 times his annual salary in five years' time. Last year, Mr Snook's basic salary, before bonuses and share options, was £500,000. Should Orange perform at the top end of expectations, earning Mr Snook the full payout, he would receive an additional £15m, even if his annual salary was frozen. If, as is more likely, Mr Snook's salary rises, his eventual payout could be even higher.

Mr Snook's near-record incentive scheme is the reward for transforming a £700m investment in the early 1990s by Hutchison Whampoa and British Aerospace into Britain's third biggest mobile phone company with a price tag of £18.5bn. Although Orange is growing rapidly, it is only just becoming profitable and investors have never been paid a dividend.

Mannesmann will retain Orange as a distinctive brand name in the UK as well as in Austria, Switzerland and Belgium. But the D2 and Omnitel brands will be retained in their respective German and Italian markets.

Though Mannesmann exercises control over growing fixed-line telecoms businesses in Germany and Italy, it is in mobile that the company leads Europe. With Orange, the German-based group will have more than 20 million customers and strong positions in three of Europe's top four markets.

The German company's offer breaks down as 0.0965 new Mannesmann shares and £6.40 in cash per Orange share. That valued Orange at £16.29 per share, although a sharp decline in Mannesmann's share price meant the offer is worth around £15.42 at yesterday's market close.

Klaus Esser, chairman of Mannesmann's executive board, conceded that the price for Orange was high, but in line on a multiple of cash flow basis with Deutsche Telekom's £8.4bn acquisition of One2One in August.

"Fundamentally this is a good price for Orange shareholders," Mr Esser said. "And it is also a good price for Mannesmann shareholders."

Mr Snook, who has criticised Deutsche Telekom for its bureaucratic inflexibility in the face of the rapid cut and thrust of the mobile sector, yesterday praised his German acquirer.

"Mannesmann doesn't operate like a typical German company," he said. "It moves faster, along the lines of a UK company. They have a strong belief in branding and want to extend Orange across Europe; their ... vision is very similar to our own."

While Orange, Mannesmann and Hutchison executives smiled for the cameras yesterday, Vodafone AirTouch was absent, if not entirely forgotten. Chris Gent, chief executive of the UK's biggest mobile company, faces difficult tradeoffs about what to do with minority stakes in Mannesmann-controlled mobile companies in Germany and Italy.

"This is a done deal," said one banker, commenting on whether Vodafone might attempt a spoiling bid for Mannesmann. With Hutchison, which holds 44.8 per cent, accepting the offer ,"it's certain the deal will go through."