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EU APPROVES WPP ACQUISITION OF GREY

Commission Says Merger Won't Impede Competition

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NEW YORK (AdAge.com) -- The European Commission today approved WPP Group's acquisition of Grey Global Group, clearing the way for Grey shareholders to vote on the sale. The commission, Europe's regulatory body, concluded the merger would not significantly reduce competition.


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U.K.-based WPP, the No. 2 advertising holding company, agreed Sept. 11 to buy New York-based Grey, the industry's No. 7 firm. The deal won quick U.S. regulatory approval. But it hit an unexpected roadblock Nov. 22 when the commission asked for additional information about the European media-buying clout of the combined WPP (owner of MindShare and Mediaedge:cia) and Grey (owner of MediaCom). WPP refiled its merger application with the commission Dec. 10.

Won't impede competition
The commission had faced a deadline of today to make an antitrust ruling. European regulators concluded today that the merger "would not significantly impede effective competition," according to an EU statement.

Based on WPP's stock price today, Grey shareholders will get $1.61 billion in cash and WPP stock.

The decision was not a surprise; WPP and analysts had not expected the deal to have trouble getting antitrust clearance. WPP generated 41% of its $6.7 billion revenue in 2003 from Europe (including the U.K.). If it had owned Grey in 2003, Europe would have accounted for 42% of WPP/Grey's combined $8 billion revenue.

Shareholder meeting
Grey now will schedule a shareholder meeting to vote on the deal. At that meeting, the merger must clear two remaining hurdles: Get approval of, first, at least two-thirds of the voting power of outstanding Grey shares (namely, common shares, which each get one vote, and Class B shares, which each get 10 votes); and, second, at least two-thirds of the total number of outstanding shares (with each common and Class B share getting one vote).

The first hurdle is a non-issue: Grey Chairman-CEO Edward Meyer has voting control of the Class B shares, assuring passage.

Outside shareholders
The second hurdle, though, means the deal must get approval from outside shareholders for the merger to go through. A WPP filing last month noted: "Even if ... [Grey] directors, officers and employees vote all of the Grey shares they own in favor of the adoption of the merger agreement, a majority of the Grey shares held by the Grey public stockholders ... will need to be voted in favor of the adoption of the merger agreement."

Outside approval is likely: WPP is offering Grey shareholders a package of cash and WPP stock worth $1,061 for each Grey share based on WPP's stock price today. Grey shares traded below $800 a share before the first media reports in late June that Mr. Meyer had put Grey up for sale.

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