Case #2 – Vodafone AirTouch’s Bid for Mannesmann

Mergers and Acquisitions

Group 4

Mergers and Acquisitions

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Executive Summary

Mannesmann’s acquisition of Orange

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Vodafone’s proposal for the acquisition of Mannesmann

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Analysis of the different actors of the deal

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May 13th 2013

Mergers and Acquisitions

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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%) and was Vodafone AirTouch’s rival in the UK market. • This acquisition strengthens Mannesmann’s presence in the mobile and the internet market. • Besides its strong position in Germany, the acquisition of Orange increased Mannesmann’s critical size and power. It helps Mannesmann to negotiate with competitors –especially Vodafone. • Economic rationale • Between 1994 and 1998, Orange had a