GfK looks to wealthy families to raise £1bn-plus fund to battle WPP

LONDON - It is being reported today that GfK could turn to wealthy German families as it seeks to raise in excess of £1bn to launch a cash bid for TNS and take on WPP Group, as the battle for the market research firm turns hostile.

Shares in TNS soared almost 12% yesterday as GfK responded to WPP Group's £1.08bn hostile bid for TNS and confirmed it plans to team up with a partner to buy the market research giant instead of pursuing a nil-premium merger.

GfK and TNS have now terminated plans for their merger and TNS has cancelled the July 18 meeting called for shareholders to approve or reject it.

However, TNS remains keen on a tie-up with GfK and has just released a statement to the London Stock Exchange saying it has permitted the German company time to work on its potential offer.

It also called on shareholders to not to accept WPP's latest 260.6p-a-share offer.

GfK has not yet made a new offer and said negotiations are at an early stage. It is not actively pursuing an all-cash offer. GfK has not named its partner, but has said that it is "an identified potential source of equity and equity related financing".

However, it has been reported that GfK might turn to wealthy German families, as it looks to raise cash to trump WPP's offer.

The FT said that members of the Herz family, which holds a stake in sports wear firm Puma could be one source of finance. Another could be the Quandt family who are investors in BMW. GfK is unlikely to turn to private equity.

WPP's offer consists of 173p in cash and 0.1889 new WPP shares for each TNS share.

TNS and GfK have agreed that no break fee needs to be paid because of the abandonment of the merger plans.

Shares in TNS have soared today. They were up 4.8% this morning, but jumped again following the breaking news of GfK's offer. The British market research firm's shares are now up 11.9%, or 29.50, on yesterday's close to 277.5p.

Bob Willott, the editor of the Marketing Services Financial Intelligence newsletter, thinks TNS shareholders' focus is now thoroughly on short-term gain from any deal:

"I believe that under the original TNS-GfK merger deal there was a potentially attractive upside for those prepared to take a medium term view.

"But the intervention of WPP -- and consequent replacement of the original GfK merger plan with the possibility of a rival cash offer from GfK -- will doubtless cause the investment community to focus on the short term.

"In those circumstances, by far the biggest influence on the outcome will be how much immediate cash is on offer irrespective of any strategic or long-term implications."