Vodafone

vs
Mannesmann
Case Study of a Hostile Takeover

Group 40
Huizhu Zhang 2378343
Ho Keng Mun Mervin 2378411
Wenye Hao 2377326
Yixin Ye 2378795
Yuhan Liu 2377803
Zhou Yu 2378298
 1 What is a Takeover?

2 Case Study Introduction

CONTENTS
3 Takeover Process

4 Post-merger Analysis
01 What is a Takeover?
 Definition of Takeover

A takeover refers to the transfer of control of a firm from one group of shareholders to another.

Merger Proxy Contest

Leverage Buyout Takeover Management Buyout

Tender Offer Acquisition

Friendly Takeover vs Hostile Takeover

With the support of Against the wishes of 输入文本

stockholders stockholders

Lower cost Higher cost

Easier to succeed Harder to succeed

02 Case Study Introduction
Introduction of Vodafone

Vodafone

Two mergers
transformed its
regional influence
and industry status
1983 – A
subsidiary of
British electronics
company Racal
2012 – One of the
largest and most
Initially expanded
successful
into the market
companies in UK UK-based
through licensing
Telecommunications company
Introduction of Mannesmann

Mannesmann AG

1995 - Controlled
D2 company

Düsseldorf-
based company

Disappeared,
automotive and
telecommunications 1990 - Successful German-based
after Vodafone merger entry into Industrial conglomerate
telecommunications
field
Motivation of Vodafone’s Takeover

Mannesmann’s
Expansion Plan

Orange A. Influence interest of

domestic businesses in UK

B. Compete with Vodafone's

position in European market

Vodafone Mannesmann
03 Takeover Process
 Step 1: Friendly Offer
14th November 1999
An estimated amount of
$106.4 billion in total
Klaus Effer, CEO of Mannesmann
argued that offer was 'completely
inadequate'
Mannesmann rejected

Proposal values Vodafone’s tender offer

Mannesmann at €203 a
share, a 9.4% premium
to Mannesmann's share
price

Vodafone LN Price (Nov 1999)

£150.42
£161.78

Announcement Date Hostile Bid Date Adjusted Close

Step 2: Hostile Bid: Higher Price Offered
19th November 1999

Mannesmann still rejected,
justifying that it will see an
outstanding growth rate of
Due to Mannesmann's
nationalistic position in
Germany, there was a very
intense reaction throughout
the country in response to
Vodafone's hostile takeover'

D2/Orange in the future

Vodafone rose offer

to almost €125
billion in total
Step 2: Hostile Bid: Higher Price Offered
19th November 1999
Mannesmann share price was €185 on 12th Nov 1999 (Friday), share price has been rising from the month before due to
speculation.

Mannesmann AG Price (Nov 1999)

220

210 €203
200 €191.40
190

180

170

160

150

140

Announcement Date Hostile Bid Date Last Price

Step 2: Hostile Bid: Higher Price Offered
Vodafone directly approached Mannesmann's board

“We seek ‘mutual agreement’ and

shareholders should take this offer for
their profits.”

“We do not wish to lose potential

growth, It’s ‘simple mathematics’ to
decide.”
Step 3: White Knight Strategy
18th January 2000

Mannesmann found Vivendi SA, a French leading media conglomerate, as a ‘white knight’. Vivendi
finds itself in talks with both Mannesmann and Vodafone.
Stock Price changes of Vodafone and Mannesmann during the negotiation

Vodafone LN Price (Jan 2000)

£185.09 £182.73

White Knight Start Date White Knight End Date Adjusted Close

Mannesmann AG Price (Jan 2000)

€261 €266.5

White Knight Start Date White Knight End Date Last Price
Step 4: Agreement of Merger
4th February 2000

Vodafone AirTouch and Mannesmann reached agreement

with combine in a $185 billion takeover deal

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relevant headline, modify the text
content, also can copy your
content to this directly.
 Stock Price changes after Merger
Vodafone LN Price (Feb-Apr 2000)
220
210
£189.75
200
190 £170.96
180
170
160
150

Agreement Date Completion Date Adjusted Close

Mannesmann AG Price (Feb-Apr 2000)

400

380

360 €321.5
340
€305
320

300

280

260

Agreement Date Completion Date Last Price

04 Post-merger Analysis
 After the Merger

♦Mannesmann was disintegrated.

Orange is sold to France Telecom In addition to the telecommunications business, the industrial Vodafone suffered huge deficit of £7.71
sector is divided and sold according to different sub-sectors. million due to debt repayment after
acquisition
After the Merger

♦Vodafone

To maintain Vodafone's position in the market in the light of the debt:

♦Continue merging ♦ Establishing an image

Acquired BT's shares in Airtel and Brand advertising investment

Japan Telecom
Integration of cultures
Acquired additional shares in other
company (Swisscom, Iusacell, Eircell） Broaden market presence in Japan
and Hong Kong
 Financial Ratio Analysis

ROA and ROE was high before merger, but profitability dropped drastically from 2000 onwards. Possible reason is the
burst of the dotcom bubble in the early 2000s.
Vodafone LN (1999-2010)

110

90

70

50

30

10

-10

-30
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

ROA ROE
 Financial Ratio Analysis

EPS dropped from 2000-2001, again possibly due to dotcom bubble. It increased from 2003 onwards, with the exception of
2006. In 2006, Vodafone recorded the biggest loss in the UK thus far, due to write-downs of the values of acquisitions in Italy
and Germany, amongst which included Mannesmann.
Vodafone LN (1999-2010)
0.5

0.3

0.1

-0.1

-0.3

-0.5

-0.7

-0.9

-1.1

-1.3
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EPS
Vodafone's Situation Today

Vodafone ranked 4th in the number Investments in 27 countries around

of mobile customers the world

In 2018

Ranked 158th in Fortune 500 Jointly operated with local mobile

companies operators in 14 countries
 100
150
200
250

0
50
01/06/1999
01/10/1999
01/02/2000
01/06/2000
01/10/2000
01/02/2001
01/06/2001
01/10/2001
01/02/2002
01/06/2002
01/10/2002
01/02/2003
01/06/2003
01/10/2003
01/02/2004
01/06/2004
01/10/2004
01/02/2005
Vodafone's Situation Today

01/06/2005
01/10/2005
01/02/2006
01/06/2006
01/10/2006
01/02/2007
01/06/2007
01/10/2007
01/02/2008
01/06/2008
01/10/2008
01/02/2009

Vodafone
01/06/2009
01/10/2009
01/02/2010
01/06/2010
01/10/2010
FTSE100

01/02/2011
01/06/2011
01/10/2011
Vodafone vs FTSE100 (1999-2019)

01/02/2012
01/06/2012
01/10/2012
01/02/2013
01/06/2013
01/10/2013
01/02/2014
01/06/2014
01/10/2014
01/02/2015
01/06/2015
01/10/2015
01/02/2016
01/06/2016
01/10/2016
01/02/2017
01/06/2017
01/10/2017
01/02/2018
01/06/2018
01/10/2018
0.00
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
7,000.00
8,000.00
9,000.00
Vodafone's Situation Today: Acquired into Vodafone and A
dissolution of departments
Was the takeover good or bad?
Mass retrenchment occured B
except for telecommunications
division

For Vodafone Huge impact on German industry C

Loss of culture as Mannesmann D

had more than 100 years history
A Expansion into new German
market

B Absolute leadership in Europe For Mannesmann

C Increased in adveristing and

investor awareness

D Increased financial performance

Vodafone's Situation Today:
Are takeovers are always a good strategy in business competition?

In December 2008, Bank of America bought Merrill Lynch for $50 billion and at the time executives knew
that the deal would sour BofA's earnings for years.

The losses were ultimately so huge that the bank required a second bailout worht $20 billion.

In 2000, Time Warner merged with AOL in a deal valued at $240.07 billion. The two companies lost
billions of dollars as both failed to capitalize on each other's strengths.

Time Warner CEO remarked that the merger was “the biggest mistake in the history of the company”.
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