TNS Rejects WPP Bid--For Now

Sir Martin SorrellThe head of market research company TNS came out swinging Wednesday, arguing that WPP's attempted takeover is at least partly rooted in WPP's own uncertain prospects. CEO David Lowden also suggested that WPP is attempting to capitalize on financial turmoil to acquire his company at a below-value price.

Lowden said WPP's $2 billion offer, which TNS has rejected, is an indication that the market research sector is better positioned than WPP's traditional advertising base. WPP's hunger, he said, shows that "market research remains a growth industry--and at a time when there may be cyclical downturn--or, arguably, long-term decline in terms of advertising revenues."

He added that a TNS (Taylor Nelson Sofres) acquisition by WPP would "clearly" help "shift the balance of their business more toward marketing services"--a stated goal.



Of course, Lowden was no doubt looking to entice WPP to increase its offer price. He said TNS would have preferred to merge with fellow market research firm GfK, but the German company pulled out of the bidding Wednesday.

TNS operates in 80 countries. WPP would use an acquisition to merge it with its Kantar Group and mount a challenge to Nielsen. Ironically, WPP has a joint venture with Nielsen outside the U.S. "I believe that WPP are being opportunistic ... when the market is low, they are trying to secure what they see as a strategically attractive asset at a price that is below what shareholders should insist upon," Lowden said.

Lowden said that WPP's offer values TNS at 11.5 times EBITA, whereas some acquisitions in the sector recently have come in as high as 14.5 times. GfK's pullout, however, does appear to put WPP chief Martin Sorrell in the driver's seat to eventually gain control of TNS.

TNS reported results for the first half of 2008 Wednesday, with 17% revenue growth. Most of its first-half growth came from overseas. The company said the U.S. market was a sore spot with declining revenues.

From TNS' perspective, Lowden said the GfK merger offered more synergies--particularly in the technology area--and an opportunity to spark "very much a shift change within an industry." There were certain capabilities the merger would have brought to the marketplace that a combination with WPP would not allow, he said.

In regard to WPP, Lowden said his criticism is "not to say they're not a good company. They've got some very good research businesses," he said. "They've got others that I would argue are not performing as they should do. But that's not my particular problem."

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