...Case #2 – Vodafone AirTouch’s Bid for Mannesmann Mergers and Acquisitions Group 4 Mergers and Acquisitions 1 Executive Summary Mannesmann’s acquisition of Orange page 3 Vodafone’s proposal for the acquisition of Mannesmann page 5 Analysis of the different actors of the deal page 10 May 13th 2013 Mergers and Acquisitions 2 Mannesmann’s acquisition of Orange Companies’ backgrounds • Mannesmann is a German conglomerate created in 1890 and originally specialized steel tubes production. In 1990, it entered the telecommunication industry by creating the first private mobile phone network in Germany. Then, it quickly became one of the European leaders in the sector. • Orange was founded in 1994. At this date, it was the 3rd largest wireless operator in the UK with a 18% market share. It also had interest in Austrian, Swiss and Belgian telecommunication companies. NB : Orange was the last British operator that was not part of an international telecommunication company. Strategic and economic rationale for Mannesmann’s acquisition of Orange? On October 20 1999, Esser (Mannesmann’s CEO) announced Orange’s acquisition. For each Orange share, Mannesmann would pay £6.40 in cash and issue 0.0965 new shares. • Strategic rationale • The best strategy for Mannesmann to enter the UK market was to acquire a company which already had a significant market share. Orange was precisely one of the leader in the UK with the 3rd market share (18%)...
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...Case Questions. A. Williams, 2002. 1. Evaluate the terms of the proposed $900 million financing from the perspective of both parties. How would you calculate the return to investors in this transaction? If you need more information, what information do you need? 2. What is the purpose of each of the terms of the proposed financing? 3. Conduct an analysis of Williams’ sources and uses of funds during the first half of 2002. How do you expect these numbers to evolve over the second half of 2002? What is the problem facing Williams? How did it get into this situation? How has it tried to address the problem it is facing? 4. Some might describe Williams as “financially distressed”. What evidence is there that Williams’ business may be compromised as a result of its previous financial decisions? 5. As the CEO of Williams, would you recommend accepting the proposed $900 million financing offer? If not, what alternatives would you pursue? B. Dividend Policy at Linear Technology. 1. Describe Linear Technology payout policy. 2. What are Linear’s financing needs? Should Linear return cash to its shareholders? What are the tax consequences of keeping cash inside the firm? 3. If Linear were to pay out its entire cash balance as a special dividend, what would be the effect on value? On the share price? On earnings? On earnings per share? What if Linear repurchased shares instead? Assume a 3% rate of interest. 4. What should...
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