WPP makes hostile $2.1 billion TNS takeover bid

Wed Jul 9, 2008 3:42am EDT
By Kate Holton

LONDON (Reuters) - WPP Group , the world's second-largest advertising company, launched on Wednesday a hostile bid worth 1.08 billion pounds ($2.13 billion) for British market research firm Taylor Nelson Sofres.

TNS, which rejected an approach at the same price from Martin Sorrell's WPP last week, has planned a merger instead with German group GfK Holdings AG .

WPP is offering 173 pence in cash and 0.1889 of a new WPP share for each TNS share which, based on Tuesday's closing WPP price of 464p, values each TNS share at 260.6p.

TNS shares traded at 260.25 pence on Wednesday. WPP was down 0.75 percent at 466 pence.

Many analysts say WPP could return with a higher bid but they still expect TNS shareholders to be tempted by the offer, which has a high cash component at a time of economic and stock market uncertainty.

The Financial Times newspaper also reported that GfK could make a counter-offer to head off WPP.

"With this offer you are getting a healthy premium on the undisturbed share price back in April, a large portion of which is in cash," Numis analyst Richard Hitchcock said.

"So the more nervous you are about the environment and about TNS's ability to deliver synergies (with GfK), the more attractive WPP's offer is."

The offer represents a premium of 52 percent to where TNS shares stood before news of its planned merger with GfK in late April.

WPP Chief Executive Martin Sorrell wants to combine TNS with WPP's Kantar market research business to create the world's second-largest insight, information and consultancy group in a market that has grown at around 5 percent in recent years.

Winning TNS would diversify WPP's revenue stream, leaving it better placed to weather any global economic downturn.

"We believe that the offer for TNS generates value for WPP share owners and offers TNS share owners both cash certainty and equity upside," Sorrell said in a statement, adding that WPP had waived its earlier pre-condition for TNS to recommend the offer.

"Although our offer may be characterized by some as a 'hostile bid', we believe that it is in no way hostile to TNS share owners nor to TNS's clients and people," Sorrell added.

TNS, which is the world's third-biggest market research company with clients such as Procter & Gamble , previously rejected three earlier proposals from WPP, at 230 pence, 242 pence and then 260 pence last week.

TNS said all three offers substantially undervalued the company. Its shareholders are due to vote on the merger with GfK on July 18 while GfK's investors will vote on July 21.

(Reporting by Mike Elliott; Editing by Erica Billingham)