Strategy of Mannesmann to takeover Orange
Block takeover by Vodafone. Orange gives Mannesmann a great strategic fit, as it increases market share in the UK. 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. Orange has additional holdings in Austria, Belgium and Switzerland and will provide good synergies to the Mannesmann porfolio. Orange is also a high growth company; CAGR 115%
Conclusion
The acquisition of Orange makes a lot of sense from a strategic perspective! 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%. Before the announcement of the acquisition = share price of Mannesmann was at € 154. 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 different opinion about the aluation of Orange! Just a few months earlier Deutsche Telekom acquired One2One fro €14 bn
Comparables
The acquisition of Deutsche Telekom can be taken as a comparable as they purchased 100%; €58. 1m POPS wich is the same of the Mannesmann acquisition! EBITDA per subscribtion 57x 4,745 Euros 77. 5x 8,857 Euros EV/EBITDA 21. 9x Deutsche Telekom … One2One Mannesmann … Orange European Average
Conclusion
Mannesmann did overpay for Orange!! From a financial perspective, Mannesmann should better not have acquired Orange. That’s why the share price dropped significantly by 8% after the announcement as well!
