UPDATE 1-WPP asks TNS shareholders to press board for talks

(Adds reaction, share price)

By Kate Holton

LONDON, May 6 (Reuters) - Advertising group WPP Plc (WPP.L) has urged Taylor Nelson Sofres TNS.L to engage in talks over a possible offer, sending shares in the market research firm up over 13 percent as investors eyed a looming bid battle.

British-based Taylor Nelson (TNS) said on Sunday it had rejected a 230 pence a share, or 950 million pound ($1.9 billion), offer from WPP, saying it preferred to press ahead with talks on a nil-premium merger with Germany's Gfk (GFKG.DE).

Analysts interpreted the WPP move as opportunistic, with the world's second largest advertising company looking to acquire the smaller market research firm before it becomes a larger entity with a blocking shareholder.

But they also thought WPP could return with a higher offer.

"We are surprised and disappointed that the board of TNS has rejected our offer proposal within 24 hours of receipt," WPP Chief Executive Martin Sorrell said in a statement.

"While we continue to review our position, we encourage TNS shareholders to urge their board to engage with us rather than simply persisting on an exclusive basis with a 'nil premium merger' arrangement with GfK."

TNS shares were up 11.6 percent to 240 pence at 1005 GMT on Tuesday.

Taylor Nelson provides data analysis for clients such as Procter & Gamble Co (PG.N) and analysts believe the industry will hold up well during a downturn as companies still need information on their products and markets.

TNS said last week it was in talks with Germany's GfK over a deal which would create the world's second-largest market information group by revenue, behind Nielsen Co..

Under the plan, the merged group would have a combined valuation of over 1.4 billion pounds and would be renamed GfK-TNS, with strong expertise in faster-growing markets such as Asia, Latin America and eastern Europe.

According to press reports, the two firms are looking for savings of 80 million pounds which is significantly higher than analysts had been expecting.

"Given the potential for greater returns, we believe WPP could afford a higher offer," analysts at UBS said in a note to clients.

"At 230 pence, we estimate the deal is 6 percent accretive in 2011 (earnings estimates), but based on synergies of 1 percent of the combined cost base we believe WPP could offer 270 pence, still see accretion and generate a return of investment capital of more than 8 percent.

"The offer demonstrates the strategic value of research assets, which should drive a re-rating of GfK & Ipsos, and may spark further consolidation."

According to media reports, industry leader Nielsen Company is also considering a counter offer for GfK. (Additional reporting by Mark Potter; Editing by Quentin Bryar)