Vodafone → AirTouch Communications
Vodafone's 1999 cash-and-share takeover of AirTouch, won against Bell Atlantic with a late increase in the cash, created Vodafone AirTouch, the platform for the Mannesmann bid, and gave Vodafone the US business that became its 45% of Verizon Wireless, sold in 2014 for about $130bn.
Created Vodafone AirTouch, the vehicle that went on to bid for Mannesmann later the same year.
- Value
- $60B
- Announced
- January 1999
- Completed
- June 1999
- Sector
- Telecom
- Deal type
- acquisition
- Acquirer
- Vodafone (United Kingdom)
- Target
- AirTouch Communications (United States)
Why it mattered
AirTouch was the mobile business of Pacific Telesis, the Bell company for California and Nevada, spun off in 1994 and based in San Francisco, with stakes abroad that included Germany's Mannesmann Mobilfunk. Bell Atlantic signalled interest in September 1998, made a proposal in November and confirmed merger talks in January 1999. Vodafone, run by Chris Gent, was offering five of its shares plus $6 in cash for each AirTouch share until 15 January, when, just before AirTouch's board met, it raised the cash to $9, putting the offer at $97 a share against about $83 for Bell Atlantic's all-share bid, which AirTouch's management and advisers also expected to dilute Bell Atlantic's earnings by more than 10%. AirTouch chose Vodafone.
The deal was presented as a merger of equals: each side's shareholders would own about half, AirTouch's Sam Ginn would chair the group and Gent run it from Newbury, and the combined market value was about $110bn, with more than 23 million customers in 23 countries. Advisers put AirTouch's fully diluted equity value at $58.7bn on the prices of mid-January. To clear the deal in Brussels, Vodafone undertook to sell its stake in E-Plus, the German rival of AirTouch's affiliate. Vodafone AirTouch began trading on 30 June 1999; a preliminary UK-accounting allocation put the purchase consideration at £42.7bn, £41.3bn of it goodwill.
What it left behind
The German stake put Vodafone inside Mannesmann's mobile business. After Mannesmann bought the UK operator Orange, Vodafone AirTouch launched an unsolicited bid in November 1999, and in February 2000 Mannesmann's board agreed to what was then the largest corporate merger ever. In the United States the rejected suitor became the partner: in September 1999 Vodafone agreed to combine its US wireless assets with Bell Atlantic's, forming Verizon Wireless, 45% owned by Vodafone. In 2006 Vodafone reported a £14.9bn loss after revaluing Mannesmann, and in 2013 it agreed to sell the Verizon Wireless stake to Verizon for about $130bn. A minority stake without management control can still be the most valuable thing a deal delivers, provided the controlling partner is eventually willing to buy it out.