Havas and WPP, currently involved in a tug-of-war for control of
the media buying company Tempus, are in danger of overpaying for their
prize, industry financial experts have warned.
They claim Tempus would need to grow at an unrealistic rate for either
bidder to get a significant return on their investment.
The warning follows Havas' extension of the offer period for Tempus to
17 September after receiving acceptances from just 25.2 per cent of
shareholders. It has not indicated whether it will raise its 541p share
offer price after a recent 555p counter-bid from Sir Martin Sorrell's
But the industry newsletter Marketing Services Financial Intelligence
suggests Havas has underestimated the net cost of buying out share
It assumes it will be buying out 3.45 million options, whereas WPP
expects to buy out 10.48 million.
It also claims that the synergistic gains of £12 million assumed
by Havas and £13 million by WPP would provide an inadequate return
on their investments - 4.7 per cent for Havas and 5.4 per cent for WPP -
which is less than current interest rates.
Bob Willott, the newsletter's editor, says to achieve a meaningful
return of 15 per cent a year on the investment over the next ten years,
Tempus would need to grow organically at an annual rate of 20 per cent
for Havas or 18 per cent for WPP net of inflation. This is more than
Tempus achieved during the past three years, he argues.