Taylor Nelson and GfK agree merger terms

By Kate Holton and Mark Potter

LONDON (Reuters) - Taylor Nelson Sofres TNS.L and Germany's GfK (GFKG.DE) have agreed a merger of equals to create the world's second-biggest market research company with a market value of about $4 billion (2 billion pounds).

The tie-up steps up pressure on market leader AC Nielsen in an industry which has become increasingly important as companies hunt for more information on their clients and services.

But analysts believe the deal could yet be disrupted.

TNS rejected a $2 billion takeover proposal from Martin Sorrell's WPP (WPP.L) last month and many expect the advertising and marketing group to return with a higher offer.

"While we believe there is good commercial logic in combining these businesses, we also expect WPP to return," Numis said in a note.

ABN Amro said it thought WPP could offer up to 285 pence per share, while UBS said it could offer around 300 pence for TNS, which it would then combine with its Kantar unit.

TNS is the world's third-biggest market research company, with clients such as Procter & Gamble (PG.N) and Unilever (ULVR.L), while GfK is the world's fifth-biggest and counts Panasonic and Henkel (HNKG_p.DE) among its customers.

Under the proposals announced on Tuesday, TNS would offer 11.74 new TNS shares for each Gfk share. Assuming full acceptance of the offer by GfK investors, both sets of shareholders would own 50 percent of the combined business, to be called GfK-TNS.