WPP Group's prospects of winning the battle for market research firm TNS improved this morning as the German suitor GfK ended talks to buy the British firm. In a statement this morning TNS said that after four months of talks GfK had informed them that it was "no longer pursuing a possible offer for TNS".
The two have been in talks since a merger was first announced at the end of April. Initially this was a nil premium "merger of equals", but counter offers from WPP forced the two to abandon this plan and for GfK to buy the British firm.
However, raising sufficient financing proved difficult for GfK. In July it said there was no certainty that it will launch a bid to rival WPP Group for TNS although it did hold talks with the German Herz family and more recently with private equity firm Apax Partners about funding a cash bid.
Despite GfK walking away TNS is still recommending that shareholders reject WPP's offer. It says the price Sir Martin Sorrell's company is offering under values TNS. The WPP offer values each TNS share at 268.7p. This morning TNS shares are trading at 265p, still considerably up on the 150p they were trading at in April.
However, with no other buyer on the horizon, TNS chief executive David Lowden might have a hard time fighting off some investors who are keen to accept the WPP offer. WPP has said it would combine TNS with its market research arm Kantar, the fourth-largest market research group in the world, which had 2007 revenues of $1.89bn.
TNS is the third largest with $2.14bn and GfK the fifth largest with $1.59bn -- behind second placed Nielsen with $4.71bn and IMS Health with $2.19bn. TNS made the announcement today as it reported its interim results for the six months ended June 30. It reported revenues up 16.7% to £580.4m and pre-tax profits up 13.3% to £41.8m.
Lowden said, "These results demonstrate the quality of TNS' business, the strength of our market position and the effective implementation of our strategy. We have delivered substantial growth in revenue. "Around the world, we continue to win new business and our order book is in excellent shape to reach full year underlying revenue growth of around 6%."