GfK mulls cash bid for TNS after WPP swoop

By Kate Holton

LONDON (Reuters) - Germany's GfK Holdings AG is working on a cash offer for rival British market research group Taylor Nelson Sofres after Martin Sorrell's WPP tried to muscle in on their original merger plan with a cash and shares bid.

WPP Group, the world's second-largest advertising company, made a hostile 260 pence per share or 1.08 billion pound ($2.13 billion) bid for TNS earlier on Wednesday, after its previous proposals were rejected.

TNS, the world's third-biggest market research company with clients such as Procter & Gamble, again rejected the offer and advised its shareholders to ignore the bid.

It also said it had "permitted" GfK to advance its discussions with an "identified potential source of equity".

But Sorrell, who has made hundreds of acquisitions in his time at the advertising and marketing group, told Reuters that GfK's approach was now in tatters and described the suggestion of a GfK cash proposal as "flaky".

He said he had decided to make a firm bid after meeting shareholders from TNS and WPP.

"We sounded out shareholders on both sides ... and we made the offer we did bearing in mind those conversations," he said.

TNS shares were up 10 percent at 272.75 pence at 11 a.m. EDT on Wednesday, indicating that the market expects a higher offer. WPP was up 0.3 percent at 465.5 pence after previously hitting a five-year low, while GfK was down 11.9 percent.