Mannesmann AG begins its fight-back today against the hostile $127bn offer from Vodafone AirTouch Plc after denying that there was any hope of a friendly negotiated merger between the two sides.
Speculation in the market suggested that if a small cash sweetener could be added to Vodafone’s all paper bid, the Dusseldorf-based company could be persuaded to accept a merger. But Mannesmann chief executive Klaus Esser said that any talk of negotiations was without substance.
The Vodafone offer has been rejected as inadequate and there has been no change in that respect, he insisted.
Mannesmann plotted its defense strategy at a board meeting yesterday and is expected to claim that Vodafone has undervalued assets that give it 20 million users in Europe. It will also emphasize that its fixed line assets give it an integrated approach that the Newbury, Berkshire, UK company cannot match.
The company will have to produce some striking evidence to swing sentiment in its favor. Despite the initial cries of outrage in Germany at the unfamiliar specter of a contested take-over, market sentiment was swinging behind Vodafone with speculators piling into Mannesmann shares as a cheap way to buy into Vodafone.
The sentiment found its way to Hong Kong where shares in Hutchison Whampoa strengthened last week on the gains it would make if it were to swap its 10.2% holding in Mannesmann, acquired through the sale of its Orange shareholding, for a 4.5% share in the Vodafone equity. Hutchison remains opposed to the Vodafone bid and is committed by the Orange agreement to keep its Mannesmann holding for 18 months.
There remains the possibility that Mannesmann might find a poison pill to fend Vodafone off, possibly by reaching an agreement with another telco. But with 70% of Mannesmann shares in the hands of international investors, Esser will have to produce some convincing arguments to dissuade them from the attraction of Vodafone’s offer.
