GfK mulls cash bid for TNS after WPP swoop

By Kate Holton

LONDON (Reuters) - Germany's GfK Holdings AG is considering a cash offer for Taylor Nelson Sofres after Martin Sorrell's advertising group WPP muscled in on their original merger plan.

WPP (WPP.L: Quote, Profile, Research), the world's second-largest advertising company, made a hostile 1.08 billion pound bid for market research group TNS (TNS.L: Quote, Profile, Research) earlier on Wednesday, after its previous proposals were rejected.

TNS, which is the world's third-biggest market research company with clients such as Procter & Gamble (PG.N: Quote, Profile, Research), again advised its shareholders to ignore the WPP bid. It noted that GfK was in discussions with an "identified potential source of equity".

TNS and GfK had been previously working on a merger of equals but GfK said it had now received a strong indication of interest in the cash proposal.

"The form of consideration being considered is all cash, although the formal right to vary this is reserved," it said in a statement.

TNS shares rose 10.5 percent to 274 pence at 12:15 p.m. on Wednesday. WPP was down 2.4 percent at 453.5 pence.

WPP is offering 173 pence in cash and 0.1889 of a new WPP share which, based on Tuesday's closing WPP price of 464p, values each TNS share at 260.60 pence.

Analysts had expected some TNS shareholders to be tempted by WPP's offer, which has a high cash component at a time of economic and stock market uncertainty, but also say WPP could return with a higher bid -- between 280p and 300p.