Takeover elicits a muted response from City analysts

The City has given WPP's acquisition of Grey Global a lukewarm response.

Alex de Groote, a media analyst at Credit Agricole, said analysts were initially worried that WPP would pay too much for Grey - an asset that some institutions thought it did not need - and this had led to a weakness in WPP's shares.

However, the £729 million price for Grey was lower than the City had originally feared Sorrell would pay.

"In fact, the reaction is that it (the price) is towards the low end of the range and that the terms and conditions of the deal are more favourable than we expected," de Groote said. "Despite this, the shares are more or less unchanged."

WPP's share price stood at 522p on Wednesday against a yearly high of 525.5p and a low of 515.5p.

In its reaction note, Numis said WPP now had access to a range of high-quality new clients and also extended relations with existing clients.

De Groote commented: "While the acquisition opens up the gap between WPP and its competitors, and gives it access to Procter & Gamble, it may not accelerate growth. But it does add 20 per cent of additional revenue."

However, while de Groote was concerned that Grey's lower margins would dilute those of WPP, Numis was more optimistic, saying: "We believe the acquisition is financially compelling."

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