WPP Lurks in the Long Grass as TNS and GfK Unveil Merger Terms

05 June 2008

LONDON: UK-headquartered Taylor Nelson Sofres and Germany's GfK on Wednesday unveiled the rationale and numbers for their mooted merger, along with the deal's terms.

The document was doubtless rushed to the gilded desk of Sir Martin Sorrell, ceo of WPP Group, which has twice in recent months made unsolicited (and unsuccessful) offers for TNS.

A joint statement by the betrothed stresses that the combined group would be "better positioned to meet client needs in an increasingly global and digital environment".

It also argued that a merged entity would be better able to increase revenues more rapidly than either party could by continuing solo. 

GfK's majority shareholder, GfK-Nürnberg, has given an irrevocable undertaking to accept TNS's offer, which would reduce the former's 56.8% stake in GfK to 28.7% of the combined company.

Said TNS ceo David Lowden: "We believe that this merger will create substantial value for both sets of shareholders."

Lowden will become ceo of the new firm, to be named GfK-TNS. His opposite number at GfK, Professor Dr Klaus Wübbenhorst will represent GfK-Nürnberg on the board as a non-executive director.

The new company's matchmakers claim it would be earnings-enhancing from the first full year after completion, citing a hypothetical scenario that assumes the two companies merged in 2007.

Had they done so, the enlarged group would have generated gross revenues of £1.9 billion ($3.73bn; €2.42bn) with an adjusted operating income of £218.4m and a profit margin of 11.7%.

The moneymen, meantime, scent a killing in the offing, and are laying each-way bets that WPP will make a sweetened offer for TNS.

Salivating analysts at Numis Securities increased their price target for TNS from £2.60 to £2.75 in the light of the newly published data, which reveals better than expected synergies.

On the other hand, says a Numis haruspex: "We expect WPP to return with an improvement on its last offer for TNS." A move he believes would deliver a similar level of synergies.

Data sourced from Financial Times; additional content by WARC staff