Vodafone Mannesman Case

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1a.

Value Vodafone 17 dec = sharesVodafone*priceVodafone = 154186,4042 Value Mannesmann 17 dec = sharesMannesmann*price Mannesman = 121188,6 Value combo 17 dec = 275375,0042

Value Vodafone 21 oct = sharesVodafone*priceVodafone = 130206,9767 Value Mannesmann 21 oct = sharesMannesmann*price Mannesman = 75276,765 Value combo 21 oct = 205483,7417

Indicated synergies = (275375,0042 - 205483,7417) / 0.6 = 116485,4374

We devided the difference in combined shareprices by 0.6, as the shareprices only reflect 60% of the synergies. That means the indicated synergies are 116 billion.

1b.

2000E2001E2002E2003E2004E2005E2006ETerminal Value Operating profit AfterTax (I)058,5159,9447,2639,6793,65967,85 (II)26884,72 Savings 060147360420469506
Total Synergies AfterTax0118,5306,9807,21059,61262,651473,85 PV Total Synergies (III) 110,1301265,0772647,9542790,4836875,4304949,6852(IV) 17323,35

Total Synergies 20962,11
Total Synergies in €33097,08

I.Operating profit x (1-0,35)
II.Terminal value operating profit AT: 967,85/(0,076-0,04)
III.PV of total Synergies AT assuming WACC is 7,6%, for example for 2001: 118,5/1,076^1=110,10301 IV.PV terminal value: 26884,72/1,076^6

1c.

Cost of debt = 7%
Cost of equity= 5,5 % + 1,1 * 7,7% = 13,97%
New WACC: 0,05 * 7% + 0,95 * 13,97% = 13,62%

Calculations according a new WACC of 13,62%
2000E2001E2002E2003E2004E2005E2006E2004c
Operating profit AT058,5159,9447,2639,6793,65967,8510060,81 Savings060147360420469506
Total Synergies AT0118,5306,9807,21059,61262,651473,85 PV Total Synergies104,295237,7318550,3219635,8033666,8207685,05364676,321

Total Synergies in P8219,841
Total Synergies in €12978,31

2.
What potential hurdles is Vodafone going to face to complete its acquisition of Mannesmann?

Vodafone’s bid for Mannesmann could be hindered...
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