Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Mannesmann Declares Interest in Orange PLC




LONDON -- Germany's Mannesmann said Tuesday it was in bid talks with British mobile company Orange PLC, sending Orange shares soaring 9 percent to value the company at pounds 17.5 billion ($29.2 billion).


"In response to recent speculation, Mannesmann confirms that it is in discussions which may, or may not, lead to an offer being made by Mannesmann for Orange," Mannesmann said in a statement released by the London Stock Exchange.


"A further announcement will be made as and when appropriate," it added.


Shares in Orange PLC, Britain's third largest mobile phone group whose name has often been linked with the fast-growing German company, jumped to pounds 14.60 ($24.40) in early London trade.


One London trader said he believed any bid would be pitched around that level "and certainly not at more than pounds 15 [per share]." Orange shares later stabilized at around pounds 14.45, a rise of almost 7.7 percent.


Mannesmann shares fell 5 percent in Frankfurt to 149.75 euros ($161.98).


The German group last month announced it was splitting itself into two groups, one covering telecoms and the other its traditional engineering activities, following the dramatic growth of the telecoms operations - among the most successful in Europe's newly liberalized markets.


A purchase of Orange would underline Mannesmann's pan-European ambitions by giving it a strong foothold in Britain in addition to its major presence in Germany and Italy.


It would also shore up Mannesmann's own defenses against a possible takeover by giant Vodafone Airtouch PLC by making itself prohibitively expensive.


But analysts have said Mannesmann and Vodafone, the world's biggest cell phone company, had a "no compete" agreement because they are key allies in Germany, Italy and France.


Vodafone has also promised to take a white knight role and ride to Mannesmann's rescue should it ever face a hostile bid. But any good will between the two could be lost if the German company snaps up Vodafone's British arch-rival.


Orange had been considered relatively bid proof because it is 44.8 percent-owned by Hong Kong conglomerate Hutchison Whampoa, which has consistently said it wanted to use the British company as its expansion vehicle in Europe.


But the Hong Kong group surprised the market in February by placing a 5 percent stake in a move interpreted by analysts as a move to cushion an economic crisis in Asia. It also was seen as a first move to put the UK group into play.


Hutchison confirmed a takeover approach for Orange but did not name the suitor in a statement issued in Hong Kong.


The Wall Street Journal said the planned purchase still faced a number of hurdles but that talks could yield an agreement as early as this week.


Orange is yet to move into profit. It was valued at around pounds 16 billion at Monday's closing price of pounds 13.39. Its shares have gained 92 percent in the last year, outperforming the FTSE All-Share Index by 86 percent in the year to date.


Orange said earlier this month that it had almost 3.5 million British subscribers. The fast-growing British market is headed by Vodafone and BT Cellnet while the fourth main player, One2One, was recently bought by Germany's Deutsche Telekom.


In a consolidating market driven by a data revolution and liberalization, France Telecom has also already bought an interest in NTL Inc., the company poised to become Britain's biggest cable television company.


On Monday, France Telecom also broke into Germany's mobile phone market, by acquiring a 60.25 percent stake in E-Plus, the market's third largest player.


Mannesmann, already a leading mobile phone operator in Germany, recently raised its stakes in Italian fixed-line company Infostrada and mobile phone group Omnitel to majority stakes, making it one of Europe's major telecoms companies.