BREAKFAST WITH THE FOOL
Friday, February 4, 2000
"Time is the longest distance between two places."
-- Tennessee Williams
Vodafone Snares Mannesmann
By
Richard McCaffery (TMF Gibson)
For the third time in four months, investors are reading about the biggest merger in corporate history.
In November, MCI WorldCom (Nasdaq: WCOM) agreed to buy Sprint (NYSE: FON) for about $129 billion. Then in January, America Online (NYSE: AOL) tied the knot with cable giant Time Warner (NYSE: TWX) in a deal worth around $131 billion. Now British cellular phone company Vodafone AirTouch (NYSE: VOD) is buying German rival Mannesmann (OTC: MNNSY) for about $190.5 billion.
Vodafone's hostile bid, submitted about three months ago, turned friendly yesterday when it sweetened the deal.
The acquisition makes Vodafone, already the world's biggest mobile phone company, even bigger with about 42 million customers in Europe and the United States, according to The Wall Street Journal. In fact, the new company is almost twice the size of its largest competitor, NTT Mobile Communications in Japan.
Started as part of the British electronics company Racal in 1982, Vodafone had just 19,000 customers in 1985. Today it has operations in more than 24 countries on 5 continents.
It's an understatement to say the company is well positioned in the United States. After buying AirTouch Communications in 1999, Vodafone hatched a plan to combine its U.S. cellular assets with Bell Atlantic (NYSE: BEL), which is in the process of buying GTE (NYSE: GTE). When the smoke clears, the Bell/Vodafone venture will have around 23 million U.S. customers, again nearly twice as many as its largest competitor, NOW 50 Index company AT&T (NYSE: T).
The deal, which is expected to receive a tough regulatory review from the European Commission, is expected to accelerate consolidation in an already fast-moving market. Vodafone Chairman Christopher Gent's goal all along has been to create a mobile phone giant with global scale based on a common technology. He's got it.
Under terms of the deal, Vodafone shareholders will control 50.5% of the company, with Mannesmann shareholders controlling 49.5%. Mannesmann Chairman Klaus Esser will join Vodafone's board as an executive director.
News to Go
Jill Barad, the chief executive of struggling toy manufacturer Mattel (NYSE: MAT), resigned yesterday after an emergency board of directors meeting. Outside directors will help run the company while the board searches for a replacement. Mattel yesterday reported a fourth-quarter net loss of $18.4 million, or $0.04 per share, on sales of $1.8 billion. Mattel's Learning Company division reported a fourth-quarter pretax loss of $183 million.
Microprocessor giant Intel (Nasdaq: INTC) bought Ambient Technologies, a privately held company that makes digital subscriber line (DSL) products, for about $150 million in cash. Also yesterday, the company bought India-based chip designer Thinkit Technologies.
Cellular telephone company Dobson Communications (Nasdaq: DCEL) sold 25 million shares at a price of $22 in its initial public offering yesterday, raising $550 million. Dobson offers cellular telephone service to about 400,000 subscribers in rural areas of 11 states, including Texas, Oklahoma, Maryland, New York, and Pennsylvania.
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