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Vodafone AirTouch’s Bid for Mannesmann University of Delaware - ARTH 153case4

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Vodafone AirTouch’s Bid for Mannesmann Executive Summary: Problem Statement: Vodafone AirTouch was one of the world’s leading international mobile telecommunications companies. In November 199 ... 9, it announced a takeover bid for the German telecommunications and engineering group Mannesmann AG, on the basis of an exchange of shares between the two companies. The Mannesmann board rejected acquisition proposal, because he believed that AirTouch undervalued Mannesmann. In one word, it worthed more than AirTouch’s offer. Besides, Mannesmann bought UK third largest wireless operator Orange PLC in 1999, hoping that this bid would place it outside AirTouch’s reach. The combination of these two company give rise to significant synergy and if this acquisition failed, the fate of the two firms would be at stake. In addition to the confliction on the bid price, there are two obstacles: the German corporate governance system and the voting restriction in Mannesmann articles of association. Main Problems: Analysis: 1. The strategic rationale for Mannesmann’s acquisition of Orange is to enter the UK market. Orange, the third largest wireless operator in the UK market, owns 18% market share of UK market, which makes Mannesmann competitive. The acquisition offers Mannesmann greater bargain power while negotiating with Vodafone AirTouch. Orange’s high growth rate makes it a good target. For Mannesmann, the attraction of Orange is its spectacular growth, a CAGR of 115% over 1994-1998. Another economic rationale for Mannesmann is the scale effect. Company size allows purchasing economies for infrastructure, IT, and handset procurement, and reduces the cost of network operations. In other words, the merger of Mannesmann and Orange creates revenue cost synergies [Show More]

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