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Merger Latest – TNS Opens Books; 'May Sweeten Deal'
TNS has agreed to open its books and give WPP the same information it gave to GfK as part of their recent merger agreement. Meanwhile, reports suggest that the GfK-TNS merger may face an EU competition probe; and may be 'sweetened' by a cash bonus for TNS shareholders.
Until now, TNS has not supplied the financial information to WPP as the latter is a competitor - however, it has now agreed to do so under the rigid confidentiality rules of the UK Takeover Code, following a formal request. Despite the decision, TNS said in a statement today that its board 'remains committed to implementing the [GfK] merger which it believes to be in shareholders' best interests.'
The rumoured EU competition probe would centre around the market for TV-audience measurement, with a possible requirement for either behavioural remedies or disposals in order for the merger to gain approval from the Commission. Although a TNS-WPP merger is likely to face similar hurdles, WPP CEO Sir Martin Sorrell told the Sunday Telegraph newspaper (www.telegraph.co.uk ) the potential probe meant the would-be partners 'didn't seem to have done their market research' and only reinforced his earlier comments about job losses: 'it makes the synergy and margin targets seem less realisable. More jobs will have to go in the UK, France and Germany if they want to achieve them.'
According to The Times (www.timesonline.co.uk ) the proposed merger 'could be restructured' to give TNS investors a cash sweetener in order to see off a further bid from Sorrell, but this 'may result in management control passing to the German group'. The paper says TNS 'has gearing capacity' to borrow if it requires, and could pay 'a large special dividend' of an uncertain sum to its investors. Net debt of £353.6m at December 31 2007, 2.5 times earnings, could be raised to four times earnings,ie £560m or 48p per TNS share, allowing TNS to pay a further £200 million cash. 'As a price for joining forces with a debt-laden TNS' the paper warns, 'GfK is likely to demand that its management... would run the enlarged company and its headquarters would be in Nuremberg.'
Lowden however told The Times he sees Sorrell as a spoiler: 'First and foremost, he sees the logic and, quite frankly, he doesn't like it. He'd be very pleased to see this merger not succeed.'
Web sites: www.tnsglobal.com , www.gfk.com and www.wpp.com .
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