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Fellow Travellers Wobble Merger Bandwagon
Despite approval from the Board of the GfK Verein, the 'merger of equals' with TNS continues to face pressure from two sides: Sir Martin Sorrell, who has one more day to decide for or against a 'hostile' bid; and workers and a former Chairman at the German firm he describes as 'very traditional'.
On Friday, the GfK workers' council issued a statement opposing the deal due to possible redundancies and suggesting the risks from the tie-up outweigh the opportunities. Around 70 GfK employees had protested outside Thursday's meeting, some carrying banners and some apparently asking 'why a healthy company such as GfK should want to merge'. Local press have suggested some workers were 'disappointed' by the size of the demo - the firm has around 1,900 German employees.
On the Board itself, there was dissent from former boss Peter Zühlsdorff, who has resigned his honourary Chairmanship due to opposition to the merger, which he considers a 'paradigm shift' with the loss of control by the traditionally motivated Verein.
Zühlsdorff, who says the firm should find a way of protecting both shareholder interests and stakeholder value, chaired the Group's supervisory board between 1992 and 2004 - the period in which it developed from a German company to a global market research group - and supervised the 1999 IPO. This is not his first resignation on principle: in September 1995 he quit a leadership position at hair care giant Wella A.G., due to what were described as 'irreconcilable differences' with the family owners on strategic issues. He was nominated as GfK's Honorary Chairman in December 2004.
The Frankfurter Allgemeine Sonntagszeitung newspaper has quoted Verein manager Raimund Wildner saying 'At the moment, the [Verein members'] mood is divided' and that 'If the members say no, there will be no merger.' The company is not legally bound to follow the members' vote since their Board has approved the deal.
Sorrell, who will meet more shareholders tomorrow, said in an online interview published at the weekend (http://news.moneycontrol.com/india/news/advertisingmarketing/2009-to-be-tough-for-advt-indwpp/02/00/345638 ) that there were four options still open with the two least aggressive options holding the balance (60%) at present - 'We stay where we are or we walk away'. Alternatively, 'There is a 30% probability that we would increase from where we are to improve our offer and 10% probability that we would go hostile.'
He emphasized his desire for TNS to strengthen the base of WPP: 'The non-traditional advertising business should be two thirds of our business rather than a half. Measurability that is direct and market research should be half of our business rather than a third. TNS helps us to reach that objective.' Of GfK he said the parties were 'dealing with a company based in Europe with a strong tradition going back to 1934 in Bavaria... a very traditional company.'
Sir Martin has been given until this Wednesday, 9th July, to make a decision.
Web sites: www.gfk.com , www.tns-global.com and www.wpp.com .
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