• by Joe Mandese  @mp_joemandese, May 5, 2008

TNS, the London-based media and marketing research giant that has been making a push into the digital TV set-top data business, rejected a $1.87 billion buyout offer from WPP Group, and research giant Nielsen Co., is believed to be readying an even bigger offer that would further consolidate the industry.

"The Board has no hesitation in rejecting this opportunistic proposal as it substantially undervalues the company even on a standalone basis," Donald Brydon, chairman of TNS stated Sunday, after TNS confirmed it was taking a pass on a buy-out offer that would have catapulted WPP's Kantar Research unit to the No. 2 position in the world of media research, just behind Nielsen Co.

WPP, which is the parent of media agencies such as MindShare, Mediaedge:cia, MediaCom and Maxus, and full-service shops like JWT, Ogilvy & Mather and Y&R, also has formidable research holdings, and has been eying ways of expanding its position in that marketplace. Among other possibilities, has been an acquisition of Aegis Group, whose Synovate research unit is considered a prize target, along with its media services networks (Carat, Isobar, Posterscope and Vizeum).

WPP's Kantar unit, interestingly, already is in a substantial joint venture with Nielsen Co. for TV ratings services outside the United States, and there are periodically discussions that the two companies might also look at a broader tie-up at some point.

In the wake of TNS' rejection of WPP's bid, a number of reports began circulating overnight that Nielsen was readying its own bid. Nielsen, which is controlled by a group of private equity firms known as Valcon, already is highly leveraged, and recently announced a deal to acquire IAG Research in the U.S. for $220 million.

Credit bureau Standard & Poor's, meanwhile, has raised its corporate credit rating for Nielsen Co. to "stable" from "negative," reflecting improved operating results and progress in the wake of its year-long cost cutting initiatives that have reduced its total global workforce by about 10%. S&P, however, noted that Nielsen's discretionary cash flow remains weak, raising questions about how it would muster the resources to take out TNS, which already has announced plans to merge with German market researcher GFK.

TNS, which has held a relatively staid position in the U.S. until recently - known best for its TNS Media Intelligence competitive ad tracking services - has recently begun expanding into media audience research, striking impressive deals with cable and satellite TV operators to exploit their digital set-top databases. TNS's recent deal with satellite TV giant DirecTV will create a digital set-top based ratings service with at least 100,000 satellite TV households.