Vodafone Air Touch's Bid for Mannesmann

1a. Vodafone offered an exchange ratio of 53.7 Vodafone shares for every Mannesmann Share by stock swap. Vodafone needed to issue 27.8 billion new shares to completely acquire Mannesmann. Vodafone valued Mannesmann at €138billion, €266 per share based on the share price on Dec.17. The offering was a premium of 14% over Mannesmann price that day and a premium of 72.2% over Mannesmann's closing price on Oct. 18. All in all, Mannesmann shareholders would own 47.2% of the equity of the new combined firm.

1b. As of December 17, the market value of Mannesmann's contribution to the combined firm is 44.01%. (Refer to the appendix 1)

1c. Yes, as a Mannesmann shareholder, I would accept the current offer because the premium £15900 million was already over 20% of Mannesmann's MV and the fraction of Mannesmann's shareholders in the combined firm was relative high (47.2%). In the long-term, the combined firm will easily dominate the European telecommunication market and potentially become the top telecommunication firm in the world by incremental amounts of revenue, subscribers and major market share. Instead of global competition, Vodafone and Mannesmann would cooperate at this time to show their strength of economic scale and synergic efficiency to be the top player in the telecommunication market sector. (Refer to the appendix 2&3)

1d. Although 20.9% of premium is painful, expensive and potentially dilute the weight of Vodafone's shareholders, the total synergy gain could amazingly inject additional value to combined firm as high as 11%. In addition, the NPV of merger is well positive at £6127.1million.The merge had to be done by many strategic and competitive reasons. Without the merge to bring synergy, Vodafone is not able to dominate European telecommunication market as well as global market as No.1 telecommunication services provider. (Refer to the appendix 2&3)

2. German corporate governance system was markedly different from Anglo-Saxon system. The difference made a hostile takeover to unlikely succeed. In addition, the corporate culture in Germany is dedicated to benefit all the stakeholders instead of the stockholders in the US and UK. Employees also hold significant power and crucial decision-making position in German. Potentially, German CEOs are also hurdles of the merge because they don't have abundant stocks and no benefit from the merge. Another major obstacle was the voting restriction in Mannesmann's articles of association. By the statue, no shareholder was entitled to vote in excess of 5% of the capital stock of Mannesmann. There was also concern regarding the response to the hostile takeover in Germany and the ensuing debate in Europe because the bid was one of the few foreign hostile bids in Germany and the largest one. The supporters of this acquisition should be the large institutional investors of Mannesmann based in US or UK