WPP says GfK misleading market on TNS bid

BEIJING (Reuters) - WPP (WPP.L), the world's No. 2 advertising and marketing firm, said on Monday that German market researcher GfK (GFKG.DE) was misleading the market about its intentions to acquire British rival Taylor Nelson Sofres TNS.L.

WPP has made its own $2.2 billion offer in cash and shares in a hostile bid for TNS, which has said publicly it prefers to partner with GfK.

The German company said, however, that there was no guarantee a bid would be made even as the two companies are in talks.

"They are misleading the market," WPP CEO Martin Sorrell, told Reuters in an interview from his company's headquarters in the Chinese capital.

"They say they have access to an unidentified but substantial source of capital," said Sorrell, surrounded by modern art in the central shopping district of Beijing. "It is time to put up or shut up."

WPP is the only official bidder, and is waiting for the first closing date of August 29, when TNS shareholders will vote on the offer.

A merger between GfK and TNS would create a market research group to rival market leader AC Nielsen, which is owned by a private equity consortium.

Sorrell said if his bid for TNS failed there were other potential acquisition opportunities in the industry including Nielsen, IMS Health Inc RX.N and Synovate, owned by British rival Aegis (AEGS.L).

"There are other big assets in the industry," he said, without saying whether WPP was in any current talks.

WPP is looking to beef up its own research arm, Kantar, as it expands into new media, a market Sorrell reckons is growing as clients become comfortable with advertising on the Internet and next-generation Web 2.0 services.

"If we just focus on television ads we would be dead," he said. "We have to grow our business digitally."

U.S. marketers spent just $471 million on online video advertising in 2007, according to Forrester Research, or only 2.6 percent of all interactive marketing.

Sorrell is optimistic about the contribution from both China and new media to WPP's revenues down the road.

"I would like China to be our second biggest (market) and digital to make up about a third" of total business, said Sorrell, adding that both goals could be reached in as few as five years.

The United States accounts for 37 percent of WPP's business currently, while its No. 2 market, the UK, represents 15 percent.

And while China is still a small part of WPP's global revenue mix, representing less than a fifth of the United States' portion, it is growing at a much faster clip of about 17 percent.

"The market opportunity is bigger in China for us than it is in the United States," he said, referring to the incremental growth in the advertising and marketing sector.

Larger rival Omnicom Group Inc (OMC.N) had organic growth of 6.4 percent in the first quarter, compared to WPP's disappointing 5 percent like-for-like revenue growth.

WPP has said it expects revenue to grow by around 6 percent this year, driven by the Olympics, the U.S. elections and the Euro 2008 soccer tournament.

(Additional reporting by Michael Wei)

(Writing by Kirby Chien; editing by Jonathan Hopfner)