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Hostile deal sets up wireless giant

Vodafone's record-breaking takeover creates the world's biggest wireless company with holdings on four continents.

Two of the world's leading companies in wireless communications agreed Thursday to merge in a $183-billion deal, the largest ever.

In a stunning end to the kind of hostile takeover attempt once considered unthinkable in Europe, Vodafone AirTouch PLC of Britain negotiated the acquisition of Mannesmann AG of Germany. The all-stock transaction easily shattered the previous record for a takeover deal, America Online's $165-billion purchase of Time Warner announced less than three weeks ago.

If consummated, the takeover will vastly expand the geographic reach of Vodafone, which already is the world's biggest wireless telephone company, giving it dominance in the European market and a global base of more than 50-million customers. Vodafone already has a major presence in the United States and two dozen countries in Asia and Africa.

(Vodafone is partnering with Bell Atlantic Corp., which in turn plans to merge with GTE Corp., to form the nation's biggest wireless services network. In the bay area, those services will be offered through what is now called Primeco.)

The new company's large coverage area would make it easier for mobile phone users to take their service with them around the globe. Also, "they will be the biggest mobile Internet provider in the world and possibly even one of the biggest Internet providers in the world," as online services move to wireless devices, said Tim Sheedy, a senior analyst at International Data Corp.

But the Vodafone-Mannesmann deal is perhaps more important as a watershed in European corporate behavior and the export to Europe of bare-knuckled takeover tactics first honed on Wall Street.

Never before has a European company carried off a hostile takeover on such an audacious scale: cross-border, cross-cultural and paid for with shares in a company that was almost unknown outside of Britain 10 years ago.

The deal came just four days before the expiration of Vodafone's takeover offer to holders of Mannesmann stock, which Mannesmann's management had called unwanted, unfriendly and too low.

And although it was nominally called a "friendly" merger Thursday, Klaus Esser, the chief executive of Mannesmann, only capitulated when it became obvious that a majority of his shareholders were about to sell out.

"The shareholders clearly think that this company, Mannesmann, a great company, would be better together with Vodafone AirTouch," Chris Gent, Vodafone's chief executive, said.

Esser, who had been voluble in his opposition to Vodafone's takeover designs and had been expected to resign, said he would continue to work for the combined company, but he will be a clear subordinate to Gent. Esser will become a non-executive chairman and keep a seat on the company's board. Mannesmann will get an additional four seats on the board.

Mannesmann shareholders will control a 49.5 percent share of the combined company and get 58.96 Vodafone shares for each Mannesmann share they own. Based on Vodafone's closing share price Wednesday of $6.21, the total value is about $366.14 per share, or $183-billion.

Esser insisted that the situation was the best possible outcome. But the discomfort was evident between Esser and Gent. Despite a show of collegiality, they could barely bring themselves to shake hands for more than a moment.

_ Information from Bloomberg News and the Associated Press was used in this report.

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