WPP to offer $4bn for rival

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The Independent Online

Sir Martin Sorrell is preparing to plunge WPP Group into its first hostile bid battle since it took over Ogilvy & Mather a decade ago, with a $4bn (£2.5bn) offer for Young & Rubicam.

Talks between Sir Martin and Tom Bell, chief executive of the New York-based advertising and public relations group, broke off last week over the thorny issue of golden parachutes for senior Y&R staff, which could be worth tens of millions of dollars. Sir Martin has been e-mailing Mr Bell since then trying to persuade him back to the negotiating table.

However, Sir Martin is keen to make an offer for Y&R, and if he cannot win agreement from Mr Bell he is ready to make a hostile bid.

He is keen to exploit the disaffection of Y&R employees, who own nearly 40 per cent of the company's stock and are unhappy, partially because of the way Mr Bell runs the group but mainly because the Y&R share price has nearly halved this year.

The New York group, one of the stars of Madison Avenue, American advertising's spiritual home, only floated on the New York stock market last year. However, since then it has lost both staff and clients, recently seeing the US Army and Ford of Brazil withdraw business.

Sir Martin has been stalking Y&R for some time. He wants to run the main advertising agency as a third network, to complement J Walter Thompson and O&M, and is also keen on Y&R's public relations businesses, Burson Marsteller and Cohn & Wolfe.

Indications from inside Y&R are that employees might be keen on an offer from WPP.

Sir Martin is expected to make a tender offer saying that if Y&R agrees to be taken over, WPP would be willing to pay as much as $4bn for the business, a 40 per cent premium to Y&R's closing price on Wall Street on Friday.

If this tactic does not work, it is understood that Sir Martin is prepared to make a full-scale hostile bid, relying on the fact that both Y&R shareholders and staff may prefer the group to be part of WPP than independent.

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