Jeremy Warner's Outlook: TNS: Sir Martin is still falling short

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The Independent Online

Taylor Nelson Sofres, the market research group, is right to reject Sir Martin Sorrell's latest takeover approach, despite the fact that in these markets, the mooted 260p a share might seem worth having. It's a big premium to where the shares were before the takeover spat began and to where they are likely to fall back to if Sir Martin decides to throw in the towel. Even capitalising the promised synergies, the board's preferred merger with GfK of Germany is in the short term unlikely to deliver as much value. So why do I say stick with TNS?

Looking through the present bear market in media stocks, 260p severely undervalues a company which is uniquely well placed to benefit from the long-term growth of the market research industry.

Sir Martin's tilt at TNS is, in essence, a defensive move aimed at frustrating the creation of a powerful rival to his own market research interests. The value of his bid, which is largely in WPP paper, is also suspect given the possibility of a prolonged downturn in the wider advertising market.

Don't forget, WPP nearly went bust in the recession of the early 1990s. Sir Martin has since studiously avoided the high levels of debt that nearly sunk him last time around, but the company's acquisitive business model is highly vulnerable to staff desertions if straitened conditions put earn-outs under threat.

Market research, by contrast, shows no sign of a slowdown and might even benefit from weakened economic conditions as clients seek new ways of chasing scarce sales. The internet further enhances the attractions of these businesses. Sir Martin needs to bid more if he's serious about adding TNS to his collection of trophies.

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