Vodafone Mannesman Case

1a.

Value Vodafone 17 dec = sharesVodafone*priceVodafone = 154186,4042
Value Mannesmann 17 dec = sharesMannesmann*price Mannesman = 121188,6
Value combo 17 dec = 275375,0042

Value Vodafone 21 oct = sharesVodafone*priceVodafone = 130206,9767
Value Mannesmann 21 oct = sharesMannesmann*price Mannesman = 75276,765
Value combo 21 oct = 205483,7417

Indicated synergies = (275375,0042 - 205483,7417) / 0.6 = 116485,4374

We devided the difference in combined shareprices by 0.6, as the shareprices only reflect 60% of the synergies. That means the indicated synergies are 116 billion.

1b.

2000E 2001E 2002E 2003E 2004E 2005E 2006E Terminal Value
Operating profit AfterTax (I) 0 58,5 159,9 447,2 639,6 793,65 967,85 (II)26884,72
Savings 0 60 147 360 420 469 506
Total Synergies AfterTax 0 118,5 306,9 807,2 1059,6 1262,65 1473,85
PV Total Synergies (III) 110,1301 265,0772 647,9542 790,4836 875,4304 949,6852 (IV) 17323,35 Total Synergies 20962,11 Total Synergies in € 33097,08

I. Operating profit x (1-0,35)
II. Terminal value operating profit AT: 967,85/(0,076-0,04)
III. PV of total Synergies AT assuming WACC is 7,6%, for example for 2001: 118,5/1,076^1=110,10301
IV. PV terminal value: 26884,72/1,076^6

1c.

Cost of debt = 7%
Cost of equity= 5,5 % + 1,1 * 7,7% = 13,97%
New WACC: 0,05 * 7% + 0,95 * 13,97% = 13,62%

Calculations according a new WACC of 13,62% 2000E 2001E 2002E 2003E 2004E 2005E 2006E 2004c
Operating profit AT 0 58,5 159,9 447,2 639,6 793,65 967,85 10060,81
Savings 0 60 147 360 420 469 506
Total Synergies AT 0 118,5 306,9 807,2 1059,6 1262,65 1473,85
PV Total Synergies 104,295 237,7318 550,3219 635,8033 666,8207 685,0536 4676,321 Total Synergies in P 8219,841 Total Synergies in € 12978,31

2.
What potential hurdles is Vodafone going to face to complete its acquisition of Mannesmann? Vodafone’s bid for Mannesmann could be