M ANNESMANN

VS .

V ODAFONE

ON A HOSTILE TAKEOVER

December 2000 Martin Marinschek, Student ID 9803246

Abstract
This paper summarizes the proceedings of the largest merger in the history of the telecommunication business, including the two players Vodafone and Mannesmann. Analyzing the history of the two companies, the reasons for the merger, the merger itself and the outcome of the takeover, as well as the impacts on society, economy and legislative are the major concerns. Along the way, a short description of the acting persons shall be given, and the environment of the merger shall be shown as appropriate for a complete description.

Table Of Contents
1 An Introduction To The Case ........................................................ 3
1.1 Mannesmann Before The Merger ..............................................3 1.1.1 It All Began With Tubes................................................................3 1.1.2 A Company In Change..................................................................3 1.2 Vodafone Before The Merger ...................................................4 1.2.1 A Pure Telecommunication Player.................................................4 1.2.2 The Merger Vodafone Airtouch...................................................4 1.3 Compare The Price: Mannesmann And Vodafone ........................ 5 1.4 The Opponents: Klaus Esser And Chris Gent.............................. 8 1.4.1 Klaus Esser..................................................................................8 1.4.2 Chris Gent...................................................................................8

2 The Proceedings Of The Merger .................................................... 9

2.1 Mannesmann Wants Orange ...................................................9 2.2 Vodafone Wants Mannesmann ................................................. 9 2.3 Mannesmann Fights With All Means .........................................9 2.4 Vivendi: The White Knight? ................................................... 10 2.5 Finally Vodafone Wins ........................................................... 11

3 The Future: Bright And Sparkling? ............................................... 11

3.1 Vodafone Mannesmann: The Biggest Player.......................... 11 3.2 Creating A New Brand: Forget About Mannesmann............... 13 3.3 The Impacts On Economy And Society .................................... 13 3.3.1 Impacts On Europes Economy....................................................13 3.3.2 Impact On The Exchange Rate Of Currencies...............................14 3.3.3 Impact On Legislation.................................................................14 3.4 Two Winners Are Clear ........................................................ 15

Martin Marinschek, 9803246 Mannesmann vs. Vodafone

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An Introduction To The Case

This chapter will tell about the essential information necessary to understand why the merger between Mannesmann and Vodafone could happen, and why a company like Mannesmann, one of the fastest growing German companies, was a takeover candidate.

1.1
ter.

Mannesmann Before The Merger

The foundations of Mannesmann and its history are the contents of this chap-

1.1.1

It All Began With Tubes

It all began with tubes: in 1890 the "Deutsch-sterreichische Mannesmannrhren-Werke Aktiengesellschaft" was founded, due to the fact that an innovative process of manufacturing seamless tubes a lot cheaper caused a huge spark in the demand for such tubes. (Mannesmann. 2000. An Outline of Mannesmann History of the Mannesmann Group.) Later Mannesmann expanded its concept to play an important role in the field of Steel Engineering and the Automotive Industry as well. In 1990, it was a widely diversified group as the company history quotes. In 1990, the hundredth year in the history of the company, Mannesmann is a widely diversified technological Group that successfully operates internationally in the sectors of mechanical engineering and plant construction, drive and control systems technology, electrical engineering and electronics, vehicle engineering as well as in the production and trading of the original product of steel tubing. This traditional sector, the Group nucleus, provides only around 28% of the sales in 1990 and the trend is steadily sinking (Mannesmann. 2000. An Outline of Mannesmann History of the Mannesmann Group.)

1.1.2

A Company In Change

Finally, in 1990, the company bought the first licence for a private mobile telecommunications network in Germany, called its network D2 and rapidly grew to be the leader of the mobile communication business in Germany. (Mannesmann. 2000. An Outline of Mannesmann History of the Mannesmann Group.) The company was still active in other sectors as well, but these sectors started to be less important over time, the tube production sector was highly deficitary, the still very well running engineering part was not the only decisive part of the annual turnovers anymore as in 1999 the sales of telecommunication products were more than a third of the complete turnover. (Mannesmann. 2000. Mannesmann at a Glance.)

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Klaus Esser, the CEO of the company, was in the process of selling the tube department and initiating an IPO for the engineering part as well, reducing the scope of Mannesmanns business to a pure telecommunication one. (Esser 2000) In the course of action, he was searching for a partner in the UK, a market where Mannesmann was underrepresented at this time. His strategy regarding the internet and wireless phone calls over wires compared best to Orange, the largest concurrent of Vodafone, and he agreed with Hutchinson Whampoa, Oranges largest shareholder on buying a majority stake in the company. (Walker 2000) In the proceedings the share price dropped, this opened up the vulnerability of the company: its low market capitalization in comparison to the other huge TelCos.

1.2

Vodafone Before The Merger

The history of Vodafone is a shorter one than Mannesmanns, as can be seen from the next chapter.

1.2.1

A Pure Telecommunication Player

The following history is taken from the companys history that can be read in Vodafone, 2000, Company History. In 1982, Racal Radio Group took part in the bid for the first private mobile telecommunications license in the UK. It succeeded, and rapidly developed its customer base. The telecommunication part of Racals business was soon to be called Vodafone. In 1991, Racal and Vodafone demerged, and Vodafone emerged as a separate legal entity, then with a customer base of 697,000. The following years helped Vodafone to grow into an international company, a global player, with agreements in most of the European countries and in other parts of the world as well (especially Hong Kong, Netherlands, Germany and France). Finally the last step to be an important global player was set: The merger with Airtouch provided Vodafone with the necessary access to the US market to call itself a real international company.

1.2.2

The Merger Vodafone Airtouch

This merger, as said before, was the last step to a truly international company, set by Vodafone in 1999 and leaving the world unsure about the future of the emerging telecom giant. It sounds fanciful. A virtually unknown British company beats two US giants in a battle for an American leader in one of the world's fastest growing businesses to pull off Europe's largest transatlantic takeover. But it's true. Vodafone Group PLC outbid Bell Atlantic and scared off MCI-WorldCom to snare AirTouch Communications, the San Francisco-based cellular phone services company, in a $62 billion deal
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that overshadowed the Daimler-Chrysler and BP-Amoco transactions of 1998.( Barnard B. 1999. Vodafone Air Touch.) In July 1999 the merger between Vodafone and Airtouch was completed (April, C. 1999. Vodafone, Airtouch complete Merger.) And Chris Gent did not have enough: His aims at this point were to be among the top ten of the largest companies worldwide and to have a subscriber base of 40 mio. people in 2003. Further acquisitions had to follow to achieve this goal. ( Barnard B. 1999. Vodafone Air Touch.)

1.3

Compare The Price: Mannesmann And Vodafone

Mannesmann shares were worth 143 at the time of the proposed merger between Mannesmann and Vodafone, with a volume of 494 mio. shares on the market which sums up to a market capitalization of around 70 bio. . The customer base of Mannesmann was around 36 mio. at the same time. (Mannesmann. 2000. Report of the Executive Board. and Vodafone. 2000. Creating Europes Global Telecoms Leader.) The following chart illustrates the valuation of Mannesmann until the November of 1999, the sharp incline in valuation due to the talkover offer by Vodafone (the peek in February is exactly the takeover date). The sharp decline of the stock price thereafter is not relevant: There are 2% of the Mannesmann shares left in the market, they are still being traded, but with a lot smaller liquidity and they gradually decrease in price.

Fig. 1: Stock price of Mannesmann ADRs on the NASDAQ for the last two years. Source: www.TheStreet.com, Quotes & Charts for symbol MNNSY

For Vodafone, the number of customers was at 30 mio. (if linear interpolation between the customer base of 1999 and 2000 is used) and the market capitalization was at more than 150 bio. . More than two times as much as Mannesmann, at the
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same numbers of customers, still not accounting for the other business of Mannesmann in addition. (Vodafone. 2000. Creating Europes Global Telecoms Leader. and Vodafone. 2000. Company History.) The interesting fact about the following Vodafone chart is the sharp increase in price from the November 1999 to the February of 2000 (much like the Mannesmann chart). In general, when a big merger happens, the company which takes over has to face a decline in stock valuation. This unusual behavior in the case of Mannesmann and Vodafone made the takeover possible.

Fig. 2: Stock price of Vodafone ADRs on the NYSE for the last two years. Source: www.TheStreet.com, Quotes & Charts for symbol VOD

Mannesmann was therefore a cheap company compared to Vodafone, maybe due to the fact that it was a mixed conglomerate of different types of engineering and that it just had an additional telecommunication business different to a pure telecommunication player like Vodafone. Shares of pure telecommunication players seem to be weighing more on the market. (Anonymous. November 1999. Die wollen uns stoppen.) Finally a comparison of the Mannesmann and the Vodafone stock chart over the last two years. Here it can be seen that the Mannesmann stock has a lot sharper increase during merger talks, and that the development of the stocks before the merger talks where completely the same. That was not always like that, the stock chart thereafter will tell a different story.

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Fig. 3: Comparison of the stock prices of Mannesmann and Vodafone over the last two years. Source: www.TheStreet.com, Quotes & Charts for symbol MNNSY in comparison to symbol VOD

If we look at the share price of two years from January 1997 to December 1999, we will see that a difference between the companies is eminent. At some time in history, the valuation must have gone different ways, and the outcome is a Vodafone stock valuation that was (at the point of the merger talks) far higher than Mannesmanns.

Fig. 4: Comparison of the stock prices of Mannesmann and Vodafone over the last three years. Source: www.vodafone-update.com, Creating Europes Global Telecoms Leader

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1.4

The Opponents: Klaus Esser And Chris Gent

And now some words to the human players, who they are and what they stood for in the growing telecommunication business and in respect to the merger.

1.4.1

Klaus Esser
The lawyer who took his doctorate degree is being called an eloquent, but quiet, passionate, but bookish and deeply private person. (Anonymous. 2000. Face value: Mannesmann's dogged defender.) He had been working for Mannesmann for more than 20 years, till he had to quit in June 2000 due to the merger.

Fig. 5: Klaus Esser Source: www.mannesmann.com, letter to our shareholders

In 1994 he took the leading of the finance department of Mannesmann to keep this position for another five years, when in 1999 he was finally appointed to be CEO of Mannesmann. A classical career, as one might say. (Preissner A., Nlting A. 1999. Der Zwei-Teiler.)

His strategies for Mannesmann were based on a mixed wired and wireless telecommunication business, along with a strong footprint in the newly emerging internet platform which was ready to be launched 2 months after the proposed merger.

1.4.2

Chris Gent
One of four brothers, he grew up in London. His father was a sailor and died when Gent was a teenager. Gent decided against university and immediately took a job as a trainee at Britains National Westminster Bank. He was politically interested and soon became chairman of the Young Conservatives.

Fig. 6: Chris Gent Source: www.vodafone.com, Annual Review Of 1999

With his interest in Cricket, he shares a major hobby and befriended with John Major, former Prime Minister of the UK. This friendship came in handy when he decided, after 14 years in the computer business, to join Vodafone in 1985. He quickly rose through the ranks of the company.

Gent is publicity shy and a very private person, still he has come to be one of the most important managers of the telecommunication business. (Anonymous. 2000. Chris Gent.) His objectives for Vodafone (and Mannesmann) were not much different than Essers: It did not look like he was on the internet track right from the beginning, though and it was clear that if he took over Mannesmann, he would demerge the wired parts of the telecommunication business and remain with the wireless ones.

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The Proceedings Of The Merger

A complete description of the merger is given in this chapter, along with some interesting facts about the participating companies and persons.

2.1

Mannesmann Wants Orange

Mannesmann, one of the biggest telecommunication companies in Continental Europe, wanted to expand its footprint to the UK as well. That is the reason why Mannesmann hired Merril Lynch to advise in the question of acquiring Orange in Autumn 1998, but Hutchinson Whampoa, Oranges major shareholder did not want to sell the company for a whole year. Klaus Esser, CEO of Mannesmann, finally succeeded: in the Autumn 1999 Hutchinson agreed with selling Orange, and on October the 20th Esser bid for the company. A peculiar situation for Vodafone: Mannesmann was going to be a major player in all European markets, whereas Vodafone would just be a minority stakeholder in all markets but the UK: something the Vodafone strategists could not agree with. (Walker M. 2000. The bid that couldn't fail.)

2.2

Vodafone Wants Mannesmann

When the idea emerged is not clear, but on October 22nd Vodafone hired Goldman Sachs and Warburg Dillon Read to help with the possible options regarding Mannesmann, and Vodafone moved quickly. It was clear that the merger between Mannesmann and Orange could not be broken, it was a done deal, so the only possibility left open for Vodafone was to bid for Mannesmann itself. Political interest in the case would be huge, that the company knew, but it set all reservations aside and bid on November 14th: a friendly takeover, valuing Mannesmann at 204 a share. Esser and his company declined, and the hostile bid was launched on November 19 . An all stock offer, valuing the Mannesmann stock at 240 a share. (Walker M. 2000. The bid that couldn't fail.)
th

2.3

Mannesmann Fights With All Means

Goldman, Sachs & Co. played an ambivalent role in the battle: first helping to sell Orange plc. from Hutchinson Whampoa to Mannesmann and then helping Vodafone to takeover Mannesmann did actually raise some questions about possible conflicts of interest. Very early in the process of the takeover, Mannesmann filed a lawsuit with Goldman on this issue, but due to problems with the provided evidence the lawsuit was cancelled pretty soon. (Reed S. 2000. The Wizards of Telecom.)

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Some observers called that step of Mannesmann clumsy (Walker M. 2000. The bid that couldn't fail.) but the principal question of the conflict of interest remained open. The next step was little better, the observer recalls: Its [Mannesmanns] first presentation to analysts in London was a chaotic affair: a room prepared for 30 analysts filled up with 150, and German executives bored them for four hours with rambling, laborious presentations. Vodafone's bankers found that they had the first month's media airtime virtually to themselves: "That gave us a momentum which we never lost," says Finegold. (Walker M. 2000. The bid that couldn't fail.) As the takeover of Orange was still not completed, Mannesmann was not able to give out all the information and take all steps that should have been taken at this time. Esser, who himself had lead the takeover agreements with Orange, had slept 14 hours in 9 days and had no time to act appropriate. Here the different styles of leading the company showed up: Esser, a leader who was not able to delegate much of his competence had to take all steps himself, Vodafone leader Gent had a staff of well trained people who he trusted much and had given them far reaching decision making competence. (Walker M. 2000. The bid that couldn't fail.) Finally, the most potent escape plan for Mannesmann was triggered: to find a white knight which would make it impossible for Vodafone to take over Mannesmann, due to the size of the company thereafter.

2.4

Vivendi: The White Knight?

The search for a possible white knight is short: Vivendi, a France telecom business offers a lot of interesting opportunities, and in the week before years end the talks begin. Vivendi played hardball in the talks, though, and so Mannesmann executives had to pose themselves the question if the takeover of Vivendi was economically justified or just a plain act of defense. Jean Paul Messier, CEO of Vivendi, had been leading talks with both Mannesmann and Vodafone about a strategic alliance before the bid of Vodafone for Mannesmann. He is now the person who might decide about success of the two players, and knows that he can make something of that fact. He is in talks with both parties still: while he talks with Mannesmann about a possible merger under terms in which Vivendi would get a third of the combined entity and the headquarters would be in Paris and Duesseldorf. Vivendi and Mannesmann were close: Vivendi wanted 36% of the combined corporation, Mannesmann wanted to offer 34% to the French company. A difference which should have been possible to overcome, but the history proved different.

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What was the missing element, the missing link in the merger talks? The observer says: it was the missing participation of Klaus Esser, the missing commitment of him to the merger that let the negotiations break down. On 23rd of January, the situation was clear: The negotiations of Mannesmann had stopped, Vodafone would be the partner of Vivendi in an internet agreement that would be led both by Vodafone and Vivendi at a 50% stake (while Vodafone brought 75% of the customers into the agreement) and Vodafone would sell to Vivendi a 7% stake of Cegetel, making Vivendi to the controlling stakeholder of the French mobile phone company. All this under the condition that Vodafone wins Mannesmann and the merger is carried through. (Walker M. 2000. The bid that couldn't fail.)

2.5

Finally Vodafone Wins

The market reacts positive to the Vivendi Vodafone deal, and this reaction finally breaks the resistance of Mannesmann. Klaus Esser, who always believed that if his shareholders would give him another year, Mannesmann could easily outperfom Vodafone and at the end of the year a merger would possibly be a merger in favor of Mannesmann, had to retreat. All he could do in the end was make the deal as positive for his shareholders as possible. Says Walker: On February 2, with the hostile bid worth nearly Euro 350 per Mannesmann share, Esser picked up the phone and asked Gent to come to Dusseldorf that night. Over the Rhine, the white Bag was flying. (Walker M. 2000. The bid that couldn't fail.) It has happened (Anonymous. 2000. Linklaters helps Vodafone and Mannesmann finally tie the knot.): On February 3rd 2000 the companys agree on the takeover, Mannesmanns shareholders receive 49.5% of the combined entity.

The Future: Bright And Sparkling?

A merger in this huge size as with Mannesmann and Vodafone can be a positive thing for the combined entity, but if the corporate cultures do not go together well or the promised growth does not step in, leaving the hefty premium paid without reasons huge amounts of values can be destroyed in takeovers.

3.1

Vodafone Mannesmann: The Biggest Player

The question about international mergers and acquisitions always is a question about the success of giving the merged company a combined corporate culture. A big question this is, in regard of the merger presented here, due to the fact that the takeover was unfriendly and the history of Mannesmann dates a long way back: it is hard to extinguish a history like that without offering some incentives for the employees. (Ryan V. 2000. Gent gets his man (Nesmann).) Other questions are the legal implications of the deal: today it looks like the merger has been planned thoroughly and carefully and the European Union decided
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it will not spoil the deal if Orange is demerged from Mannesmann in the process. Vodafone will dispose of other - especially minority - stakes as well. That is necessary for reducing the huge pile of debt that was created by the merger. (Donegan M. 2000. Done deal, but what now?.) Additionally a change in strategy has occurred: Mannesmanns Klaus Esser wanted to be a wireless play, but with wire components as well, Chris Gent wants the merged entity to be a pure wireless one. That gives room to dispose of other business units of former Mannesmann, like Arctel and Infostrada. It's going to be interesting to see how Gent's pure wireless play will follow through in Mannesmann,' said Brian Condom director of the technology group at Close Brothers Corporate Finance in London. Some of the challenges facing Vodafone include the legalities of changing the structure of Mannesmann as well as winning approval from employees. "The biggest risk now is getting all of the legal issues corrected, as in the disposal of Orange. With German legislation, it's not easy to dismantle a company" said Falk Miller-Veerse, European research manager for Durlacher. Another big issue is getting the trust of the people. It [Vodafone] will need to do a lot of internal marketing for this. It will want to keep the company culture in place and keep German representation on the board. (Donegan M. 2000. Done deal, but what now?.) The prospect of the merged Vodafone - Mannesmann seems to be promising. The currently released numbers show that Vodafone is on track, and that it beats is own forecasts as always. According to Anonymous, 2000, Strong results confrm Vodafone's standing as class act, Vodafones Ebitda rose at a rate of 24%, revenues at a rate of 32%. That is higher than expected by the consensus estimate and is a sign for a healthy development of the company. Additionally Vodafone is one of the companies with the highest credit quality in its sector and is therefore not restrained from further acquisitions by financial problems, in contrast to many of its peers in the market. Said Lehman's Martin: "Vodafone has a clear strategy and strong management. They also have a very good high end growth outlook, good geographical diversification and strong financial flexibility Vodafone's balance sheet is underleveraged. We would expect the management to start spending in higher risk areas such as Asia and Latin America. Nonetheless we expect them to structure future acquisitions in such a way that their ratings are not affected (Anonymous. 2000. Strong results confrm Vodafone's standing as class act.) The easiest way to judge a merged entity like this is to look at its contrahents: British Telecom, example given. The British Telecom faces problems like reduced profitability, possible layoffs and enhanced competition. BT has not taken any steps yet to restructure its business and to become a major player in the internet economy. Bad news for BT, good news for Vodafone who is the largest opponent of BT in the UK. (Anonymous. 2000. BT bucks the trend.) Still there is this one big issue: Did Vodafone overpay for Mannesmann? Vodafone put US$ 12,400 on the table for each mobile phone customer of Mannesmann.
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While some might say this is overpaid by a lot the question is how the payment was executed: The payment was done by giving away highly valued Vodafone stock that itself could be called overvalued. So Chris Gent probably did the right thing, there is still the question if the global strategy he plans will work out. (Anonymous. 2000. What's a Cell-Phone User Worth?.)

3.2

Creating A New Brand: Forget About Mannesmann

Vodafone wants the name Vodafone on its products: forget about the name Mannesmann. Like Coca-Cola or Mars, Vodafone should be known globally, that is the intention of the companies management. (Rosier B., Poppy B. 2000. Vodafone recruits senior Coke chief.) Thomas Geitner, Vodafone Group's Executive Board Director responsible for global branding, said: "The appointment of our first Pan European media planning agency is part of our strategy to establish a strong global brand and position ourselves as the world's leading mobile multimedia company. (Vodafone. 2000. Vodafone appoints Pan European Media Planning Agency.) In the proceedings, the name Mannesmann, that was not a very attractive brand name anyway, as it did not sound progressive and active enough, will probably vanish.

3.3

The Impacts On Economy And Society

A merger like the one described in this paper has caused by the volume of the transactions of course impacts on the economy of a society, furthermore, social questions and legislative questions arise alike.

3.3.1

Impacts On Europes Economy

Europes companies are now takeover candidates, that is the essential outcome of the Mannesmann Vodafone deal. Vodafone, though being a British company with an Anglo - American corporate culture achieved the previously unbelievable: an unfriendly takeover of a continental Europe company in this huge size. (Hanes K. March 2000. Up Front.) The doors are now flung open and the threat of political interference in mergers like that has certainly been decreased. If not even in a merger of this size the German government intervenes, then there should not be any problems anymore to enter the European corporate offices through the backdoors provided by capital (Hanes K. March 2000. Up Front.) It's no great surprise that the transaction has happened - though perhaps it is remarkable that the first such deal should be so politically charged and so large but it does usher in a new set of possibilities for acquisitive corporates. Vodafone's victory signals that even Mannesmann, a dynamic and successful company headquartered in Europe's supposed economic powerhouse of Germany, can be bought against its will by a foreign competitor. Political objections and grassroots opposition,
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even those that have more to do with national pride than financial clout, are not insurmountable impediments to a hostile deal. (Anonymous. 2000. Breaking the takeover taboo.) Not even by a bad press the hostile take-over could be prevented: that is another lection to be learned by political interveners in all countries who hope to get the public opinion on their side by influencing the press in their direction. (Anonymous. 2000. Breaking the takeover taboo.)

3.3.2

Impact On The Exchange Rate Of Currencies

In previous times, currency traders where exclusively looking on the actions of the international central banks. If they increase interests, demand in the currency will increase, if they lower interest rates, demand in the currency will decrease. Nowadays, in days of mergers in the size of Mannesmann and Vodafone, the game has changed: The traders do not only look on central banks anymore, but also on the economical activity regarding acquisitions and mergers. If Vodafone buys Mannesmann it needs a huge pile of new debt to finance the acquisition, therefore demand in the currency increases. Currency rates are changed by the possibility and the execution of a merger like Mannesmann and Vodafone, in this case raising the price of the against the US$ by two cents. If the Mannesmann Vodafone deal opened the door for other acquisitions, that would mean that the value of the European currency in respect to the US$ could change drastically. (Reed S. 2000. The Currency Game Has BrandNew Rules.)

3.3.3

Impact On Legislation

Disclosure Practices, political intervention and investor relations are the main point were critical voices are emerging regarding the Continental European business practice in general and the German one particularly in comparison to the US. It remains fact that more than 90% of US investors agree on the points above. To lure money into the Continental European market the legislative has to act. (Franco T. 2000. News Feature: Politics Fails to Taint German Equities.) Additionally there is to say that the takeover codes in Continental Europe are not very sophisticated. In Europe, it is possible to take over a company without officially bidding for it like it happened with LVMH, a luxury-goods firm, and France's Pinault group taking a third each of Gucci. In Italy, Olivetti made a bid for Telekom Italia without including minority stake holders in the process: they were left out, they did not receive any offers. (Anonymous. 1999. Finance and economics: Barriers to entry.) All of these practices would have been impossible under Britain's long-established non-statutory takeover code. It has clear rules about the level of shareholdings above which a general offer must be made for all of a company's shares (30%), and above which a bidder has control (50%). Strict rules about trading in the bidder's or target's shares prevent the creation of false markets. And minority shareholders
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are protected by provisions insisting that they must be treated equally-in terms of price and information. Moreover, in Britain, companies must observe a strict takeover timetable, which, unless concerns about competition cause delays, should limit bids to 6o days. (Anonymous. 1999. Finance and economics: Barriers to entry.) Germany is now on the way to adopt a new corporate law, with a stronger regulation of take overs. The new law is now in the state of a discussion draft, and the major points are the following: shareholders of the same class must be treated equally the shareholders of the target company must have enough time and must be provided with enough information to decide if they want to accept the takeover bid it is forbidden to create false markets by the trading in shares of bidder and target the bidder must have enough funding available at the time of the announcement of the bidding and a takeover bid must not restrict a target company in its ordinary business activities for more than a reasonable period of time.

This proposal sounds like a workable implementation of takeover rules, and the future will show if it works to make future takeovers more predictable and less vicious than the Vodafone Mannesmann one. (Krause H. September 2000. Germany reacts to Vodafone challenge with new takeover law. International Financial Law Review, London.)

3.4

Two Winners Are Clear

Two winners are clear: Chris Gent and Klaus Esser, CEO and former CEO of Vodafone and Mannesmann. Chris Gent receives 5 mio. British pounds in cash and another 5 mio. in stock for his successful completion of the merger (Anonymous. 2000. Leaders: Vodafone's folly.), Klaus Esser 60 mio. German marks as a replacement for the loss of power and influence (Anonymous. 2000. IG Metall kritisiert 60-Millionen-Mark-Prmie fr Mannesmann-Chef Klaus Esser.). Questionable remains the height of these sums, especially as the benefits of this merger have not completely been shown until now.

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