Table of contents

1.  Introduction  1

2.  Definition of “take-over“ (German: “Übernahme ) and “hostile take-over“  

  (German: feindliche Übernahme )  1

2.1  Take-over  1

2.2  Take-over of a listed joint-stock company  1

2.3  Different types of acquisition of stocks  2

2.4  Hostile take-over  2

3.  The events concerning the case of Vodafone/Mannesmann in 1999 /2000  3

4.  Press reactions concerning the take-over of Mannesmann by Vodafone  7

5.  Conclusion  13

  Reference List  15

1. Introduction

This assignment focuses on the typical aspects of take-overs, especially hostile take-overs, taking the take-over of Mannesmann by Vodafone in 1999/2000 as an example. In the first part I will introduce definitions of the terms “take-over“, ”take-over of listed joint-stock companies” , “different types of acquisition of stocks” and „hostile take-over“. The second part presents the chronology of the events and the third and last part reflects the press reactions to the greatest company take-over in Germany up to date. Finally the question whether this was a take-over or a hostile takeover will be answered.

2. Definition of “take-over“ (German: “Übernahme”) and “hostile take-over“ (German: ”feindliche Übernahme”)

2.1 Take-over

A take-over can be defined as “the achievement of control over a company”. The acquirer purchases the target, similar to a merger, but without forming a new company. The control, which the acquirer has, determines the business policy. Another factor of a successful take-over is to hold the majority of rights to vote, which enables the acquirer to stand up to co-owners when conflicts of interests occur. For the acquisition of ownership of a company there are generally two possibilities from the legal point of view:

1. Asset deal: Individual assignment of all assets and liabilities to the new owner.

2. Share deal: The ownership structure concerning the business owner (e.g. of a corporation) changes, the owner of the assets does not change, they remain at the owner’s.

2.2 Take-over of a listed joint-stock company

Even if listed companies can be taken over by means of the individual assignment of assets, a share deal is more practicable. When taking over a company by acquisition of stocks, the question of the entire shareholding remains. Which share is necessary for the owner to get in control of the whole company? The amount of holding regulates the extent of influence capability, and different nuances are possible. Literature refers to 1. a shareholding of a

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hundred percent, 2. the integration participation (95%), 3. the three-quarter majority (75%), 4. the majority holding (>50%) or 5. the blocking minority (>25%).

According to stock corporation law, these quotas constitute limits which are necessary for specific decisions of the shareholders’ meeting. For some decisions the absolute majority is not necessarily required, though. The simple majority for example suffices to assign the supervisory board, which then appoints the management board.

The question to what extend the possession of a specific majority can be called a take-over cannot be answered completely. It depends on the amount of holding as well as on the situation and the decisions which can be influenced by this shareholding.

2.3 Different types of acquisition of stocks

1. Acquisition of stocks in the range of stockjobbing

This type of acquisition requires a supply of securities being dealt at the stock markets. However, as only a fractional amount of the entire stocks of a company is circulating, a major shareholding can just be achieved over a longer period. To avoid resistance, this often takes place secretly.

2. Individual agreements with shareholders

This way is reasonable if a larger share is to be purchased by major shareholders or groups of shareholders. They often get a bonus on their shares.

3. Offerings in public

This means the public proposal of a bidder, directed at the shareholders of the company that is to be taken over. Shares are often purchased at prices above the stock market price. If the majority the bidder aims at is necessary for him to take over control, it is called a take-over bid. 1

2.4 Hostile take-over

A hostile take-over is defined as purchasing the capital majority of a company against the will of the management board, supervisory board, or the employees. The acquisition results from purchasing stocks of the relevant company. This can take place directly at the stock markets. After purchasing a capital stock, a

¹ http://de.wikipedia.org/wiki/Unternehmens%C3%BCbernahme

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take-over bid is often submitted. Domestic listed companies have to respect the take-over code of the Frankfurt Stock Exchange.

The acquired company will be integrated and not needed assets are sold to the highest bidder. 2

The term “hostile take-over” is problematic because it has a negative connotation. It is quite conceivable that the managing board does not accept the take-over proposal in order to keep their positions, even though the take-over would be reasonable for the company and from the shareholders’ point of view. Instead of “hostile take-over”, relevant literature often uses the term “uncoordinated take-over”.

3. The events concerning the case of Vodafone/Mannesmann in 1999/2000

In September 1999, the media uncovered details about the fields of activities of the Mannesmann AG. Even if the net operation profit increased in the first two quarters of 1999, the contribution from the different business areas varied - the telecommunications division drawing the largest profit. ³ Furthermore Klaus Esser pointed out that necessary future investments would be defrayed with own equity capital.

The management board emphasized that the danger of a take-over was averted for the time being because potential acquirers would await the restructuring of the company, for which Mannesmann gave an estimate of 3 years. ⁴ These news provoked an uptick of +8% at the stock markets. The management board celebrated the 10 ^th anniversary of the telecommunications division in Berlin on October 20, 1999. Klaus Esser, CEO of the Mannesmann AG, left earlier from the decennial to sign the take-over agreement with Orange, a British provider of mobile telecommunication services. The media interpreted this as an attempt to expand the own company with the objective to avert takeovers by global players. Chris Gent, CEO of Vodafone, regarded this as an attack to their domestic market, and a decision how to proceed with this competition was imperative. On October 25, the stock markets had growing evidence of a take-over of Mannesmann by Vodafone, and Gent met Esser in

² http://www.encyclopedia-wiki.org/encyclopedias/boersen-lexikon/Feindliche-Uebernahme.html

³ Wirtschaftskurier, 01.09.1999

⁴ Börsen-Zeitung, 25.09.1999

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