Mannesmann, Vodafone finalize massive telecom marriage

LONDON ý The final hours of the world's most expensive hostile takeover (so far) draw to a close in Germany Thursday night as the Mannesmann AG supervisory board votes on a merger with Vodafone AirTouch PLC.

Sources close to the talks said that everything was proceeding as planned and that an official merger of the two companies would be announced by Friday morning.

Vodafone AirTouch will pay 59 shares for every Mannesmann share, valuing the deal at between $190 billion and $199 billion and giving Mannesmann shareholders ownership of 49.5% of the combined group. The deal values the German company at $365 per share, according to Bloomberg reports, 15% higher than its closing share price yesterday.

The two companies have been in a protracted struggle since September, with Mannesmann's management attempting to scupper the plan for U.K.-based Vodafone to acquire the German company. According to wire reports earlier in the day, Mannesmann CEO Klaus Esser will lose his job in the reshuffle.

The last week has seen a bustle of activity as Mannesmann made a final effort to spurn Vodafone's advances. With the understanding in Europe that the next communications gold mine will be in the linkup between mobile phones and Internet services, both companies sought an affiliation with the French media company Vivendi and the Bertelsmann-America Online Inc. joint venture AOL Europe. Vodafone won out in the Vivendi discussions and announced last weekend that it would launch a mobile Internet portal with the French company, pending completion of the Mannesmann deal.

The European press swirled with reports throughout the week of various talks among Vodafone, Mannesmann, Bertelsmann (which is considering a sale of its stake in AOL Europe), Vivendi, News Corp., AOL Europe and virtually every major player on the European Internet scene. Content companies like News Corp. and Bertelsmann are seeking strong partnerships with mobile phone operators like Mannesmann, while all parties are facing both the threat and the possibility of partnership with the new media juggernaut, AOL Time Warner.

"It's acknowledged by everyone that the next phase of growth in the mobile industry, once people have got handsets, will be the convergence of different types of technology," said Vodafone spokesman Mike Caldwell.

Vivendi has said during the week that with Vodafone talks completed, it wants to win a stake in AOL Europe. Vivendi already owns 55% of AOL France, with AOL Europe holding the other 45%. A Vivendi spokesman said Thursday that the company was in talks with AOL about buying a stake in AOL Europe, as well as in talks with AOL Europe itself.

"We think that AOL Europe would be very well integrated into this partnership (with Vodafone)," said Vivendi spokesman Antoine LeFort. "We're going to build a multi-access portal, and AOL could have a good footprint in that portal."

AOL Europe declined to comment on any overtures made by Vivendi, Vodafone or Mannesmann, despite German press reports that Bertelsmann was prepared to sell its stake in AOL Europe to Mannesmann.

This deal sets the stage for a huge reshuffle of the whole European scene, which has fragmented between big former telecommunications companies and small national Internet operators.

For more news on the Internet Economy, visit The Industry Standard.Story copyright 2000 The Industry Standard. All rights reserved.

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