Vodafone bought Mannesmann at the top. Then it wrote off £23,515 million.
In 2000 Vodafone bought Mannesmann in an all-share deal of roughly $180 to $181 billion. It booked £23,515 million of goodwill impairment in FY2006 and £11,600 million more in FY2007.
Transcript
£23,515 million. That is what Vodafone wrote off in its FY2006 accounts, principally for one deal.
On 3 February 2000, the board of Mannesmann, a German engineering and telecoms group, accepted Vodafone's offer. Each Mannesmann shareholder got 58.964 Vodafone shares, leaving them about 49.5% of the combined company. An academic record puts the deal at roughly $180 to $181 billion.
Vodafone could have walked away. It chose to buy, and it paid in its own shares, priced at the top of the dot-com market.
The bill came later. Vodafone booked £23,515 million of goodwill impairment in FY2006, principally in Germany and Italy, and another £11,600 million the following year, again principally from Mannesmann.
Then Vodafone spent years unwinding. In March 2006, it sold all of Vodafone Japan to SoftBank for £8.9 billion. In September 2013, it agreed to sell its 45% stake in Verizon Wireless to Verizon for approximately $130 billion.
The assets were reasonable. The price was set at the peak. Vodafone paid in bubble-priced shares, and the write-downs came for goodwill booked when telecom share prices were significantly higher. One deal does not prove all-share deals are bad.
If you pay in stock, ask what your stock is worth on an ordinary day, not on its best day. When your shares are high, a deal can feel cheap. It may not be.
The records behind this video
Every figure in the video comes from this Decision Record, each with its sources.
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