As expected, WPP Group has appealed to the Takeover Panel for permission to pull out of its £434 million ($643m) purchase of Tempus Group.
WPP chairman Sir Martin Sorrell argues that there has been a ‘material adverse change’ in Tempus’s situation since the attacks on the US last month. The MAC rule allows a company to withdraw an offer if its target suffers a dramatic downturn in fortunes.
Announcing the decision on Wednesday, WPP said it “remained convinced of the strategic merits of combining with Tempus,” but added, “It is the unanimous view of the WPP board that there has been a material adverse change in the prospects of the Tempus Group following the announcement of WPP’s offer and, in particular, following the terrorist attacks in the US on 11 September 2001.”
However, Sorrell’s chances of squirming out of the deal are hindered by the fact that Tempus, though it admits suffering “many cut-backs and cancellations of advertising campaigns and projects,” has not made a profits warning since the attacks.
In addition, WPP will have to explain why it increased its holding in Tempus by 3% to 25% a week after the attacks [WAMN: 19-Sep-01]. Sorrell is expected to argue the stock purchase was made to prevent rival bidder Havas Advertising gaining control.
The Takeover Panel will hear evidence from both sides, but will not force Tempus to produce recent trading figures – recently demanded by Sorrell but refused by Tempus chairman Chris Ingram [WAMN: 09-Oct-01].
A decision is expected next week, though many analysts already think WPP will have difficulty convincing the Panel it should be able to withdraw.
News sources: Financial Times; The Times (London); MediaGuardian.co.uk