Vodafone's Bid for Mannesmann Faced with Stiff Opposition

Vodafone, a mobile phone giant, has suffered a setback in its bid for Mannesmann after Hutchison Whampoa, a Hong Kong investment group, and the American Federation of Labor-Congress of Industrial Organisations (AFL) rejected its £74 billion hostile bid. This rejection has led to a decline in Vodafone's shares, which fell 2 1/4p to 273p, while Mannesmann's shares dropped 6.2 ( £3.94) to 180. The bid, an all-paper offer, is now worth £5 billion less than when it was initially tabled on Friday.

Key Takeaways:

Hutchison Whampoa, a major stakeholder in Mannesmann, holds a 10% stake in the company and has no intention of supporting Vodafone's bid.
The American Federation of Labor-Congress of Industrial Organisations (AFL) has indirect influence over 13% of Mannesmann's shares, owned by US pension funds that have AFL union members on their boards of trustees.
Vodafone has offered to meet with pension fund managers to persuade them to support the bid, but the AFL has fiercely opposed it, citing concerns over the value of Mannesmann's partnerships.
Mannesmann's profits for the nine months to September 30 rose 3.2% to £1.11 billion, with over £1 billion coming from its telecoms division, which grew 45% during the period.
The company plans to spin off its engineering and automotive businesses sooner than expected, in the middle of 2000, which is likely to increase the value of its telecoms division.
Vodafone's bid is an all-paper offer, worth £74 billion, which is £5 billion less than the initial bid on Friday.
Chris Gent, Vodafone's chief executive, will meet with pension fund managers to persuade them to support the bid.
Canning Fok, managing director of Hutchison Whampoa, believes that the combination of Orange and Mannesmann will be a powerful entity, well-positioned for future opportunities in the telecoms business.
John Sweeney, president of the AFL, opposes Vodafone's bid, stating that it would threaten the fundamental sources of value within Mannesmann.

Statistics:

Vodafone's bid for Mannesmann is worth £74 billion.
The bid is now £5 billion less than when it was initially tabled on Friday.
Hutchison Whampoa holds a 10% stake in Mannesmann.
The American Federation of Labor-Congress of Industrial Organisations (AFL) has indirect influence over 13% of Mannesmann's shares.
Mannesmann's profits for the nine months to September 30 rose 3.2% to £1.11 billion.
Over £1 billion of Mannesmann's profits came from its telecoms division, which grew 45% during the period.
Mannesmann's shares fell 6.2 ( £3.94) to 180.
Vodafone's shares fell 2 1/4p to 273p.

Sources:

The Times, 1999