German market research group GfK AG has given up its bid for market research and business information services company Taylor Nelson Sofres Plc (TNS), being unable to raise adequate financing to counter the £1.1 billion ($2 billion) hostile takeover bid by advertising group WPP Plc.
Shares of TNS dropped almost 2.1 per cent after the bid fell through.
Nuremberg-based GfK called off plans to bid in excess of WPP's bid as financing available ''did not enable a sufficiently compelling alternative cash offer''. In a statement, GfK said that its management board has concluded that the terms of the financing available did not enable a ''sufficiently compelling alternative cash offer'' to be made for TNS that was also economically in the best interests of the GfK shareholders.
Despite the favoured suitor dropping out, TNS is still reported to be advising its shareholders to reject WPP's bid, believing that the advertising, marketing and communications group's offer undervalues the company.
The WPP Group made a formal hostile bid for taking over market-research firm Taylor Nelson Sofres (TNS) in early August, making a formal offer for the entire issued and to be issued share capital of TNS, and valuing the company at $2.28 billion. (See: WPP launches sixth and formal hostile bid for TNS)
However, the friendly merger discussion between GfK and TNS was first disrupted by Sir Martin Sorrel-led WPP in July. (See: Battle for market research firm TNS heats up; GfK approves merger while WPP threatens to go hostile) Sorrel had threatened to go hostile when TNS rejected his bid in July 2008, hoping to influence shareholders to pressurise TNS management into dealing with him. At the time, the TNS board rejected WPP's proposal of 0.1889 WPP shares and 173p per TNS share, saying it "substantially undervalues" the business.
Following the first dismissal of WPP's bid, GfK had confirmed that it was mulling an all-cash offer for TNS, jettisoning plans for a nil-premium merger. (See: GfK mulls sweetened all-cash bid to rescue TNS from hostile bid by WPP)
WPP is looking to combine TNS with its Kantar market research unit with a view to boost revenue from non- advertising sources. TNS shareholders need to decide on WPP's offer latest by 29 August. Analysts expect the bid to succeed, since GfK has dropped out of the race, and WPP would most likely choose not to revise its offer any further but for the lack of competition for TNS.
Some analysts seem to concur TNS's view that WPP's bid does undervalue the company, and that WPP is being somewhat opportunistic by trying to acquire TNS at ''a value lower than what should be paid.''
TNS is asking shareholders to reject the WPP offer, and TNS management is looking to enage its shareholders in a few days in order to prove why WPP should be paying more. In a statement, TNS said it would continue to reject a WPP's hostile takeover bid that was worth about £1.2 billion (€1.5 billion, $2.2 billion), as ''this price undervalues TNS."
Had the deal with GfK gone through, the merged TNS-GfK entity would have been the world's second-biggest market researcher, ranked just behind Nielson Co.