Last week, the acquisitive group chief executive of WPP Group made an informal offer to buy Tempus for $8.23 a share. Havas Advertising, meanwhile, has an existing formal offer in at $7.82 for a total bid of $598 million in cash, a premium of 50% over Tempus' closing share price the day before Havas first made the offer.
The first deadline for shareholders to accept the Havas bid is today, but shareholders are not expected to go for it given the possibility of a bidding war between Havas and WPP that would drive the price higher. Tempus stock closed at $8.46 a share on Aug. 17, well above the Havas offer and a clear indication the market expects a counter-offer.
"Rumors persist that WPP is about to launch a takeover counter bid for Tempus," said the U.K. investment consultant ABN AMRO in a circular that went out to investors Aug. 16. "We think it would make sense for WPP, as part of its strategy for matching IPG's Magna Global as the pace of consolidation accelerates in media buying." ABN AMRO predicted WPP ultimately "will offer 570 pence [$8.25], and the probability of this is 90%."
While Havas has a lot to lose, it's a win-win situation for Mr. Sorrell. If he acquires Tempus, he strengthens WPP's media holdings. If Havas eventually wins (and pays a hefty premium), Mr. Sorrell fattens his wallet; WPP holds a 22% stake in the company.
But the WPP proposal, although not yet formal, is said to be a serious offer rather than a ruse to drive up Tempus' market value. WPP is said to be intent on adding Tempus and its global media agency, CIA Medianetwork, to its roster of media shops.
The company has slowly been acquiring shares of Tempus. According to U.K. takeover rules, if a company accumulates 29.9% of another company, it must formally announce an intent to acquire. Tempus shareholders realized WPP was coming within striking distance of that goal, and rather than allow a "creeping" takeover without the benefit of a premium, they sought Havas as a white knight that could offer an attractive cash premium.
Havas has obtained "irrevocable undertakings" from Tempus shareholders committing them to the Havas deal. These holdings amount to about 18.8 million shares, or 25% of Tempus stock. Havas directly owns only 3% of Tempus. However, these "irrevocable" commitments can be broken if another offer is made and shareholders must choose the best deal.
Havas today is expected to request an extension on the deadline for its offer. If WPP makes a formal offer, Havas would have to come back with a higher bid to stay in the game. "There's been speculation since [Aug. 15], but there`s still only one offer on the table," a Havas Advertising spokesman in Paris said late on Aug. 17. "We have not made any decision on what to do. We`re still not sure anyone else is going to make a bid."
David McMurry, an analyst at Credit Suisse First Boston, warned there could be management defections from Tempus in a WPP deal. "Tempus was built by its founder Chris Ingram and his management team, who have publicly stated that should WPP take over Tempus, they would walk out," he wrote to investors.
Mr. Ingram has made such statements in the past, but he recently broke bread with Mr. Sorrell to discuss the WPP offer and is said to have softened his stance. If WPP succeeds, Mr. Ingram would be installed as co-chair of Group MindShare Edge, an umbrella company that would be formed over WPP's media holdings. Media Edge Chairman Beth Gordon would be the other co-chair; both would report to Irwin Gotlieb, currently CEO of MindShare, who would be promoted to CEO of the media holding unit.
Contributing: Bill Britt, Mercedes M. Cardona and Laurel Wentz