After a three-month takeover battle between the UK-based Vodafone AirTouch and the German Mannesmann AG, the latter finally agreed to a "friendly takeover" in February 2000. Vodafone declared that it would fully respect the corporate culture of Mannesmann, including the employees' co-determination rights.
On 3 February 2000, the management boards of the UK-based mobile phone group Vodafone AirTouch and the German telecommunications and engineering group Mannesmann AG reached an agreement on terms for a recommended merger which brought a three-month takeover battle to an end. In November 1999, Vodafone had announced for the first time its intention to make a takeover bid for Mannesmann (DE9911220F). After the Mannesmann management had refused the bid, Vodafone addressed its offer directly to the Mannesmann shareholders. When it became clear that Vodafone's attempt at a hostile takeover might succeed, the Mannesmann management changed its strategy and agreed to negotiate the terms for a "friendly takeover". The final agreement is based on an improved offer for Mannesmann shareholders to exchange their shares in the ratio of 58.96 Vodafone AirTouch shares for one Mannesmann share (the previous offer 53.7 to one). Furthermore, the agreement defines some terms for the integration of the two companies and their further strategic development. Thereby, it has been determined that, for example, Düsseldorf will be retained as one of two dual European headquarters with responsibility for Mannesmann's existing continental European mobile and fixed-line telephone business.
As far as industrial relations are concerned, Vodafone reaffirmed its earlier public statement of commitment to the Mannesmann employees: after the Mannesmann employees representatives expressed their strong resistance to a hostile takeover, on 24 November 1999 the chief executive of Vodafone, Chris Gent, published an "open letter" to the Mannesmann workforce saying that a merger of Mannesmann and Vodafone AirTouch would not mean additional job losses, and the rights of the employees, trade unions and works councillors would be fully recognised. On 10 February 2000, Mr Gent met with Mannesmann employee representatives in order to underline that Vodafone would fully accept the corporate culture at Mannesmann including the principle of co-determination through employee representatives on the Mannesmann supervisory board. After considering the new terms of the takeover deal, the president of the IG Metall metalworkers' union and deputy chair of the Mannesmann supervisory board, Klaus Zwickel, declared that the employee side would now be able to accept the merger.
A few days after the announcement of the final takeover deal, it became public that the Mannesmann chair, Klaus Esser, will give up executive responsibilities with a "golden handshake" worth nearly DEM 60 million. The severance payment is made up of three major components:
- a continuation of Mr Esser's basic payments and annual bonuses until 30 June 2004, the date when his current employment contract runs out (DEM 15.2 million);
- a special bonus of nine annual salaries (DEM 12.6 million); and
- a so-called "appreciation award" of DEM 31.1 million paid by Vodafone.
The president of the Confederation of German Industries (Bundesvereinigung der deutschen Industrie, BDI), Hans-Olaf Henkel, justified these payments by arguing that salaries of German managers are usually far below the salaries of their foreign colleagues. By contrast, the IG Metall president, Klaus Zwickel, stated that it was nether acceptable nor understandable for the employees that employers who always asked for wage moderation had no problems to pay such an "indecent" sum of money to a manager.
Meanwhile in the UK, after Mr Gent's November letter to the German workforce, stating that the rights of the employees, trade unions and works councillors would be fully recognised, the Society of Telecom Executives (STE) wrote to the Vodafone chief executive calling for recognition and the establishment of a relationship between the company and the union in the UK. The company replied in December that the willingness to address German trade union representatives was a recognition of their particular role in the corporate governance of German companies in general and Mannesmann in particular. At the present time Vodafone does not recognise any trade union to represent Vodafone staff, and it does not wish to pre-empt the application of new UK legislation on union recognition (UK9903189F), preferring to wait until the legislative position is clear before deciding its future position. The company thus declined STE's request for a meeting at present.