Did Mannesmann Overpay Orange
Strategy of Mannesmann to takeover Orange:
STRATEGY
1. Block takeover by Vodafone 2. Orange gives Mannesmann a great strategic fit, as it increases market share in the UK 3. Vodafone will unlikely be allowed, from an antitrust perspective, to merge with Mannesmann after the acquisition of Orange; Vodafone already has a market share in the UK of 35%; including the Mannesmann-‐Orange merger it would add up to 53%. In addition, the shares of the Investment Fund is locked-‐up for 18 months 4. Orange has additional holdings in Austria, Belgium and Switzerland and will provide good synergies to the Mannesmann porfolio 5. Orange is also a high growth company; CAGR 115% Conclusion: The acquisition of Orange makes a lot of sense from a strategic perspective!
FINANCE
1.
Mannesmann offered to pay: Pound 6.40 in cash AND 0.0965 newly issued Mannesmann shares for every Orange share That means a valuation of Orange of Pound 20 (€ 31) bn, which is a premium of almost 17% 2. Before the announcement of the acquisition = share price of Mannesmann was at € 154 3. After the announcement of the acquisition = share price of Mannesmann dropped to € 141.3 = -‐8% That is the first implication that the market had a
STRATEGY
1. Block takeover by Vodafone 2. Orange gives Mannesmann a great strategic fit, as it increases market share in the UK 3. Vodafone will unlikely be allowed, from an antitrust perspective, to merge with Mannesmann after the acquisition of Orange; Vodafone already has a market share in the UK of 35%; including the Mannesmann-‐Orange merger it would add up to 53%. In addition, the shares of the Investment Fund is locked-‐up for 18 months 4. Orange has additional holdings in Austria, Belgium and Switzerland and will provide good synergies to the Mannesmann porfolio 5. Orange is also a high growth company; CAGR 115% Conclusion: The acquisition of Orange makes a lot of sense from a strategic perspective!
FINANCE
1.
Mannesmann offered to pay: Pound 6.40 in cash AND 0.0965 newly issued Mannesmann shares for every Orange share That means a valuation of Orange of Pound 20 (€ 31) bn, which is a premium of almost 17% 2. Before the announcement of the acquisition = share price of Mannesmann was at € 154 3. After the announcement of the acquisition = share price of Mannesmann dropped to € 141.3 = -‐8% That is the first implication that the market had a