Taylor Nelson pays $425m for research operation

Click to follow
The Independent Online

The market research company Taylor Nelson Sofres yesterday agreed the $425m (£263m) purchase of NFO, the research arm of the advertising group Interpublic, but admitted up to 300 jobs could be at risk from combining the two groups.

TNS, which has bought about 40 companies over the past five years, had initially looked at buying NFO in January but had walked away, considering the then $550m to $575m price tag too high. "At that level we believed they [Interpublic] were overvaluing the business. We took a decision to exit the process but left our calling card," David Lowden, TNS's finance director, said. The two companies began exclusive talks about a month ago "based on a number we were comfortable with", he said.

TNS, which sells research on consumer trends, TV audiences and the effectiveness of advertising, believes the deal will give it a bigger presence in the US market. "It's in line with our strategy and strengthens the group in the US," Mr Lowden said, adding: "It also increases our presence in certain key sectors, like the provision of information to consumer goods companies, which we weren't particularly strong at and strengthens our healthcare activities in the US." The shares were the biggest risers in the FTSE 350, closing up 22.5p, or 16.5 per cent, at 158.5p.

TNS believes the deal will deliver annual savings of more than £3m by the end of this year, rising to more than £10m next year although there will be one-off integration costs of about £5m to £6m this year.

Mr Lowden said the company planned to take a "number of actions" to eliminate costs and stressed that not all of those were "people-related". He admitted, however, that there was "some overlap" and said that could mean 1 to 2 per cent of the combined businesses' 15,000 positions could be lost.

TNS is paying for $400m of the acquisition in cash and $25m in shares. It is financing the cash element of the deal partly with a share placing, which is fully underwritten, to raise £51m. It has also put a new £490m credit facility in place, which will go toward refinancing existing debt. It estimates its net debt will double from its current level of about £220m to about £440m.

The acquisition, which is believed to have initially attracted interest from both United Business Media and Aegis, is expected to complete in July. Interpublic, which is trying to reduce its debt burden, said it expected to record a gain of $100m from the sale.

Comments