Mannesmann Rejects Offer to Merge With Vodaphone

In what could be the prelude to Europe’s biggest takeover battle yet, Mannesmann, Europe’s second-largest mobile-phone company, on Sunday firmly rejected a purchase offer from Vodafone AirTouch, the largest mobile operator in the world.

The refusal, delivered during a Sunday night meeting in Germany between Vodafone Chief Executive Chris Gent and his counterpart at Mannesmann, Klaus Esser, was considered likely to touch off a hostile bid from Vodafone. The buyout offer, in the form of a stock swap, was valued at more than $105 billion.

Mannesmann, considered one of the hottest telecommunications companies in Europe, called the Vodafone offer “wholly inadequate” and said a combination with Vodafone was not “strategically attractive.”

The rejection was significant because Vodafone, known for its ambition, was considered likely to respond to the rejection with an offer that could be matched by any number of competitors in magnitudes that could make the whole battle one of the biggest, or even the biggest, industrial takeover in business history.

On Friday, American depositary receipts of Mannesmann closed up $7.50 at $194.50 in over-the-counter trading. The Dusseldorf, Germany-based company has a market capitalization of $75 billion. Vodaphone’s ADRs fell $4.42 to close at $47.38 on the New York Stock Exchange on Friday.

Vodafone’s desire to buy Mannesmann has been no secret for the last few weeks. But in recent days, it has become apparent that others also would like to acquire the German telecommunications and engineering company.

Reports in the British press during the weekend said British Telecommunications and Bell Atlantic Corp. were interested in buying Mannesmann. BT officials declined to comment, and Bell Atlantic officials could not be reached for comment.

The race for consolidation in Europe’s fast-moving wireless telecommunications industry, which leads the United States in providing access to data and the Internet on mobile devices, has accelerated in the last few months.

And it includes some transatlantic combinations. Last June, Vodafone completed its $58-billion acquisition of AirTouch, the largest mobile operator in the United States.

In September, Bell Atlantic agreed to combine its wireless business with Vodafone in the United States, making the combined entity the largest U.S. cell-phone provider.

Then last month, Mannesmann announced a deal to acquire Orange, Britain’s third-largest mobile operator, for about $33 billion. Mannesmann also has controlling interests in an Italian mobile company and a land-line operator. Its occasional partner in ventures on the continent: Vodafone.

Meanwhile, France Telecom is moving into Germany with the acquisition of that country’s third-largest wireless firm, challenging both Mannesmann and France Telecom’s former ally Deutsche Telekom.

Should Vodafone try to acquire Mannesmann, France Telecom is widely seen as a potential buyer for Orange. Deutsche Telekom, meanwhile, has bought a controlling interest in the British cell operator One-2-One.