Britain's Takeover Panel on Wednesday revealed the reasons underlying its rejection earlier this week of WPP Group’s appeal to withdraw from its agreed takeover bid for Tempus Group.
The decision hinged on WPP's argument that “material adverse change” in Tempus' financial position following the events of September 11 justified the voiding of its done deal to acquire the London-headquartered media-buying and research specialist.
But the panel's view was swung by the argument presented to it by Tempus: that WPP had to distinguish between the causative effects [of the decline in Tempus’ share price and future prospects] and show which were the consequences of the attacks and which resulted from the general and sectoral decline existing in the market before September 11.
In order to meet this condition, opined the panel, it required “an adverse change of very considerable significance striking at the heart of the purpose of the transaction in question”. WPP had failed to demonstrate that this was the case.
The panel was also critical of the tactics deployed by WPP chief executive Sir Martin Sorrell, deeming “unhelpful” his accusation that Tempus was in breach of regulatory requirements. In similar ‘lead balloon’ vein was Sorrell’s imputation that Tempus had used “clever accounting methods” to hide the effects of September 11.
A secondary decision by the panel – its rejection of WPP's projection of Tempus's fiscal prospects for the year to December 2002 – could set an awkward precedent for other companies in future appeals against panel decisions
The WPP forecasts, ruled the panel, were “unlikely to be meaningful”, despite the fact that Tempus itself had not produced such projections. The panel had “reached the view that there were no reliable figures for 2002 from which it could derive any useful conclusion”.
Accepting the inevitable, WPP issued a statement: “WPP's objective is now for both management teams to work closely together to integrate the two businesses and capitalise on the strategic benefits as quickly as possible.”
Insiders believe this is easier said than done given the prevailing disenchantment among Tempus management and staffers.
News source: CampaignLive (UK)