The hostile bid values Taylor Nelson at 260.7 pence a share, London-based WPP said in a statement today. The price is 52 per cent more than closing price on April 28, the day before London-based Taylor Nelson said it was in merger talks with German competitor GfK AG. Taylor Nelson jumped as much as 6.3 per cent to 263.5 pence in London trading. WPP Chief Executive Officer Martin Sorrell, who plans to combine Taylor Nelson with WPP's Kantar market research unit, scrapped a pledge to win the backing of Taylor Nelson directors for a takeover, after two months of talks failed. Taylor Nelson, which researches consumer habits for Procter & Gamble Co and Nestle SA, agreed instead in June to merge with GfK to form the second-largest market research company. |
Brice Mari, a Paris-based analyst at Oddo Securities, who rates WPP "buy," predicted investors will "switch to the WPP offer because the promises in the GfK-TNS deal seem to be unrealistic." In contrast, Johnathan Barrett, an analyst at Kaupthing Singer & Friedlander, said WPP is offering a "pretty poor price and we will need to see if GfK follows up."
WPP fell 14.5 pence, or 3.1 per cent, to 449.5 pence at 11:29 am in London trading. Taylor Nelson shares climbed 5.5 per cent to 261.75 pence.
Institutional Investors
GfK may make an offer for Taylor Nelson today, the Financial Times reported, without saying where it got the information. On July 2, the U.K.'s Takeover Panel ruled WPP had to announce by today whether it would make a bid.
Asked today whether WPP would increase its bid if GfK makes an offer for Taylor Nelson, Sorrell told Bloomberg TV that "we'll stay very disciplined in our approach and we'll see what transpires."
WPP decided to take the bid to shareholders after the company's management met "with a large number of institutional investors of both Taylor Nelson and WPP" in the last four days, Sorrell said. "It's now up to the shareholders to decide."
GfK dropped 1.1 per cent to ¤24.93 in Frankfurt trading. Before today, the shares had fallen 8.4 per cent this year. On July 3, WPP said it would only pursue the £.08 billion id if it got unanimous approval from Taylor Nelson's board.
'Bidding War':"GFK would need to offer all cash, a more attractive alternative than WPP's mix of cash/paper, particularly given news that the US ad market is weakening," Kaupthing's Barrett said. "Whether a bidding war is generated from this situation is difficult to guess at this stage."
WPP will offer 173 pence in cash and 0.1889 of a new WPP share for each Taylor Nelson share, the company said in today's statement. WPP said it waived the earlier condition for Taylor Nelson's board to recommend the offer, after repeated efforts to engage with the company's management. WPP said today it is still willing to meet with Taylor Nelson's board.
Gareth Thomas, an analyst at Collins Stewart Plc in London, said today he would not expect WPP to trump a potential 280 pence cash per share offer for Taylor Nelson.
"First, we don't believe WPP is likely to materially increase the cash proportion of its offer as it will be unwilling to compromise its current credit rating," Thomas said. "Secondly, if WPP were to outbid an all cash offer from GfK by increasing the share proportion we believe it would destroy the economic rationale of the deal."
Taylor Nelson rejected a fourth unsolicited offer from WPP on July 3, saying the higher bid still undervalued the company.
WPP Acquisitions
Taylor Nelson agreed on June 3 to merge with GfK to form the world's second-biggest market research company and challenge Nielsen Co
Analysts have said WPP's Sorrell, who made 37 acquisitions last year, needs to expand in market research because advertising growth is slowing along with the world economy.
In the Taylor Nelson-GfK merger plan, shareholders of the companies would each hold about 50 per cent of the new entity, to be called GfK-TNS Plc. Taylor Nelson would issue 11.74 new shares for each GfK share.
Sorrell told Bloomberg News on June 7 the merger plan of Taylor Nelson and GfK was "troubling" because the companies forecast synergies that "aren't realistic." The 15 per cent operating profit margins predicted by Taylor Nelson and GfK "don't exist in the industry," he said then. "My best guess is all they can get is 12 per cent."
Sorrell has said a combination of Kantar and Taylor Nelson would generate "industry-leading margins" and he would seek an operating margin of about 13 per cent in the medium term. WPP also said there will be opposition in Germany when Taylor Nelson and GfK try to cut jobs.
Taylor Nelson said July 3 that WPP was using "commentary and innuendo" to try to disrupt the GfK merger.
New York-based Omnicom Group Inc is the world's largest advertising company.
