On 16 November 1999 Vodafone AirTouch issued an announcement which set out the strategic and commercial rationale for a merger between Vodafone AirTouch and Mannesmann. Yesterday afternoon Vodafone AirTouch received a letter from Mannesmann urging Vodafone AirTouch to withdraw its proposals.
Vodafone AirTouch continues to believe that a merger with Mannesmann has compelling logic and is in the best interests of the shareholders of both Mannesmann and Vodafone AirTouch. Following receipt of yesterday's letter, the Board of Vodafone AirTouch has decided to approach the shareholders of Mannesmann directly with an increased and final offer, so that they can decide on the merits of the combination for themselves. The terms of Vodafone AirTouch's intended offer have been sent this morning to Mannesmann's Supervisory Board in advance of their planned meeting.
This announcement contains the principal elements of the intended Offer.
- The Offer will be 53.7 Vodafone AirTouch Shares for each Mannesmann Share. This values each Mannesmann Share at EUR240 based on Vodafone AirTouch's Closing Price on 18 November 1999 of 285 pence. The Offer values the Mannesmann Share Capital (assuming full acceptance of Mannesmann's offer for Orange) at EUR124 billion (£79 billion).
- Followinghe Offer and assuming full acceptance, Mannesmann Shareholders will hold approximately 47.2% of the Combined Group.
- The merger of Vodafone AirTouch and Mannesmann will create Europe's global telecommunications leader and will offer shareholders of both companies the opportunity to participate in the Combined Group's future growth.
- The Combined Group will be the world's leading international mobile telecommunications operator with over 42 million proportionate customers worldwide with the potential to serve 510 million proportionate POPs.
- The transaction is expected to generate proportionate after tax cash flow synergies of atleast £500 million in 2003 and £600 million in 2004. No redundancies will result from the transaction and employees will benefit from participating in the enhanced growth prospects of the Combined Group.
- Vodafone AirTouch believes it has a compelling strategy for the creation of long term shareholder value, driven by its focus on wireless, global reach and technological leadership.
Chris Gent, Chief Executive of Vodafone AirTouch, commented:
"We made a friendly approach to Mannesmann last Sunday. That proposal was rejected and we have now received a letter from Dr Esser making it clear he has no interest in a constructive negotiation. As a result we have decided to make an offer directly to Mannesmann's shareholders. This is the only way we can present Mannesmann shareholders with the option of investing in the world's leading, international mobile telecommunications company. I am convinced that a combination of Mannesmann and Vodafone AirTouch will produce enhanced growth prospects and superior value for the shareholders of both companies. I hope that the shareholders of Mannesmann will accept our all share offer which we believe to be in the best interests of the shareholders of both Mannesmann and Vodafone AirTouch."
This summary should be read in conjunction with the full text of the following announcement.
All Vodafone AirTouch corporate news releases can be accessed at Vodafone AirTouch's web site: http://www.vodafone-airtouch-plc.com.
Analyst and press briefings
An analyst conference will be held at The Gibson Hall, 13 Bishopsgate, London EC2 on Friday 19 November 1999 at 9.30 a.m. (London time) to be followed by a press presentation at 11.30 a.m. (London time) at the same location.
Part II
VODAFONE AIRTOUCH
ANNOUNCEMENT OF INTENDED OFFER TO MANNESMANN SHAREHOLDERS
- The Offer
- Background to and Reasons for the Offer
- The Combined Group will be the world's leading international mobile telecommunications operator with over 42 million proportionate customers worldwide and with the potential to serve 510 million proportionate POPs.
- Together Vodafone AirTouch and Mannesmann will have an unmatched European footprint with:
- control of four of Europe's largest non-incumbent mobile operators - D2, Omnitel, Libertel and Vodafone in the UK
- 30 million controlled European customers
- the largest established pan-European presence.
- The merger will create a superior platform for the development of mobile data and internet services, which are poised to become significant drivers of growth.
- The global reach of the Combined Group, together with its global brand, will make it the partner of choice for suppliers and other providers as well as the operator of choice for multinational companies and consumers.
- Significant synergies are expected to arise from the ability to leverage management best practices and purchasing economies, as well as the creation of a global brand and the introduction of new internet and data relate
- Vodafone AirTouch intends to undertake an initial public offering of Mannesmann's engineering and automotive businesses as soon as practicable, in accordance with Mannesmann's announced strategy. These businesses will retain the Mannesmann name.
- Vodafone AirTouch intends to demerge Orange to the shareholder base of the Combined Group.
No redundancies will result from the proposed transaction and employees will benefit from participating in the enhanced growth prospects of the Combined Group. - The Offer includes a continuing commitment to Düsseldrf in both the telecom and industrial businesses.
- Vodafone AirTouch's Telecom Strategy
Vodafone AirTouch believes it has a compelling strategy for the creation of long term shareholder value, for the reasons set out below.
Focus on Wireless
Vodafone AirTouch's strategy has always been to focus on wireless. It believes the growth opportunities are much greater in wireless than in wireline. Nevertheless, Vodafone AirTouch believes that it is necessary to be able to offer integrated services to certain market segments. Vodafone AirTouch achieves this either through third party commercial agreements, such as with Cable & Wireless and Energis in the UK, or through ownership of wireline assets where market and regulatory conditions make this attractive.
Vodafone AirTouch believes that Mannesmann's wireline businesses are competing effectively with local incumbent operators. Accordingly, Vodafone AirTouch intends to retain control of Mannesmann's wireline businesses, continuing to operate them separately under their current management. In due course, Vodafone AirTouch intends to undertake initial public offerings of minority interests in Arcor and Infostrada, both to realise value and to motivate management in these businesses.
Global Reach
Investors in the Combined Group will participate in the growth in mobile communications across the globe and in the opportunity to implement a global brand strategy.
In Europe, the combination of Vodafone AirTouch and Mannesmann will have controlling stakes in ten European markets. The proposal benefits both companies by creating the most extensive controlled European wireless footprint.
In addition, there are significant benefits of the proposed merger which will be derived from Vodafone AirTouch's non-European platform. For example, through its proposed joint venture with Bell Atlantic, Vodafone AirTouch will be a partner in the largest wireless operator in the key US market. Vodafone AirTouch's position in the US provides significant benefits for its mobile internet strategy, as well as being a further engine for growth.
Vodafone AirTouch's Asian presence gives it the opportunity to benefit from growth in this region, as well as providing a window on some of the leading mobile internet applications currently available.
Vodafone AirTouch's global reach also facilitates the spread of best practice and technology for the benefit of its customers.
Technological Leadership
Both Vodafone AirTouch and Mannesmann are developing new technologies to create new revenue opportunities for data and internet services. Vodafone AirTouch has been a leader in the development of new technologies, including the design of the radio link protocol and the inter-working function for GSM data.
In the UK, Vodafone AirTouch has developed a wide range of data applications and is one of the leaders in short messaging services. Europolitan, a Vodafone AirTouch-controlled company, is recognised as a world leader in data services for the corporate market. Additionally, Vodafone AirTouch has provided substantial assistance to all of its international associates, including providing the Chief Technical Officers for both D2 and OPI at their inception. - Employees and Management
There will be no redundancies as a result of the merger.
The existing employment rights, including pension rights, of the management and employees of Mannesmann will be fully safeguarded.
Mannesmann's current management team will be offered senior positions in the Combined Group. Vodafon
The Board of Vodafone AirTouch announces its intention to make an Offer for the share capital of Mannesmann. The Offer will be final and will comprise:
53.7 Vodafone AirTouch Shares for each Mannesmann Share
The Offer values each Mannesmann Share at EUR240 based on the Vodafone AirTouch Closing Price on 18 November 1999 of 285 pence. The Offer values the Mannesmann Share Capital at EUR124 billion (£79 billion).
The Offer representsa premium of 54% over the Mannesmann Closing Price of EUR155.5 on 18 October 1999, the last business day prior to speculation regarding a possible transaction between Mannesmann and Orange, and a premium of 67% over the Mannesmann Closing Price of EUR143.5 on 21 October 1999, the day following the announcement of Mannesmann's formal offer for Orange.
Following the Offer and assuming full acceptance, Mannesmann and Vodafone AirTouch shareholders will hold approximately 47.2% and 52.8% of the Combined Group respectively.
Vodafone AirTouch intends to list the shares of the Combined Group on the Frankfurt Stock Exchange in due course. An application will be made to list the New Vodafone AirTouch Shares on the London Stock Exchange.
Documents containing the Offer will be despatched to shareholders as soon as practicable.
Vodafone AirTouch believes that this transaction has compelling logic and is in the best interests of the shareholders of both Mannesmann and Vodafone AirTouch. It has therefore decided to put this Offer directly to the shareholders of Mannesmann to give them the opportunity to decide on the merits of Vodafone AirTouch's proposal.
Under the Offer, Mannesmann Shareholders will obtain a significant shareholding in the world's leading international mobile telecommunications operator. Through a share for share exchange, all shareholders will benefit from the value created by the merger of these two successful companies.
Strategic and Commercial Rationale
Vodafone AirTouch's announcement of 16 November set out the strategic and commercial rationale for Vodafone AirTouch's merger proposal. This merger will create Europe's global telecommunications leader and offer shareholders of both companies the opportunity to participate in the Combined Group's future growth.
The rationale for the merger is as follows: