DUESSELDORF, Germany -- Mannesmann AG, battling a record hostile bid by Vodafone AirTouch Plc, said on Friday it may float its Internet business to realize a growth potential greater than anything its predator could offer.
Launching its official defense, Chief Executive Klaus Esser insisted the German group had a potential value of more than 350 euros ($359.3) per share on its own -- well above the current 270 euro value of Vodafone's all-paper offer.
The fast-growing German telecommunications and engineering group has repeatedly rejected as wholly inadequate and risky Vodafone's 138 billion euro bid, which would create a global telecoms heavyweight with 48 million customers. Analysts said the defense document did not cover much new ground.
"I think it's largely a summary of the things already said," said Christoph Vogt, an analyst at MM Warburg in Hamburg.
While Vodafone dismissed Mannesmann's defense as adding nothing new, Esser called on investors to reject the bid because Mannesmann would become Europe's leading telephone company on its own.
"Do nothing. Do what you've always done. Keep your Mannesmann shares. Don't go in for the offer. You don't have to get involved in any paper work. Throw it in the bin," he said at a Duesseldorf news conference.
Esser said the management would forfeit one quarter of its pay for 2000/2001 if the group's shares did not reach 350 euros by July, 2001. If the stock fails to reach 350 euros by December 2001, management will lose half its salary.
"This is not because we are gamblers," he said. "This is simply because we believe in the 350 euro price."
Mannesmann's shares surged to touch new highs of 250.2 euros before settling back to trade around three percent higher at 250 by 1430 GMT, around 9.3 percent below the offer price. Vodafone's stock was up three percent at 316-1/2p.
"Internet is the magic word of the moment," said Theo Kitz, telecoms analyst at Merck, Finck & Co.
BHF-Bank's Hermann Reith said Mannesmann's Internet strategy outshone Vodafone's. "It's not size but speed that counts with the Internet. "Mannesmann has 2.6 million Internet customers.
An Internet IPO could enable Mannesmann to ride a wave of enthusiasm for Internet stocks. Shares in German Internet service provider (ISP) freenet.de AG for example soared 148 percent on its first day of trade last month.
Spain's Telefonica has already listed diverse Internet operations in Europe and Latin America and Mannesmann's domestic rival Deutsche Telekom AG is expected to float its T-Online Internet unit, possibly as early as April.
But one institutional investor, who holds stock in both Vodafone and Mannesmann, noted: "We think and hope Vodafone will win it because of the logic of the global argument.
"You can discuss the growth rates as long as you like, but I think the key big picture is that the advantage will be in holding a global player in a massive growth market. That's the way we hope it will go."
With pressure mounting as the clock ticks to the bid's official close on 7 February, Vodafone dismissed the defense, which it said added nothing new and had failed to address the outstanding opportunities for growth that Mannesmann and Vodafone could have together.
"Comparisons of Vodafone AirTouch today with Mannesmann miss the point," said Chief Executive Chris Gent. "Mannesmann shareholders are being offered a share in the combined group and a share in the substantial synergies and growth such a combination would create."
Vodafone, which risks being squeezed out of lucrative joint ventures in Germany and Italy if it fails to clinch the deal, challenged Esser to detail how he could become a leading technology business without a US presence.
Gent, who heads the world's biggest mobile phone company, also asked how much capital Mannesmann would need to implement its European strategy and what it could do alone that both companies could not do better together.
Vodafone also dismissed Mannesmann's suggestion of an Internet listing, saying this was a route it could also take.
Esser said Mannesmann had repeatedly made clear that it aimed to protect and maximize the company's value and was not intent on ensuring its independence at all costs. He did not rule out entering the US mobile phone market.
"But we see no obligation to hold talks with a competitor about a totally inadequate offer that merely represents an attempt to solve his strategic problems at the cost of our shareholders," he said.
"This remains our position until Vodafone submits an offer that reflects the true value of Mannesmann."
