WPP Group and Grey Global Group this week pushed back the date when either side can call off the engagement if marriage plans run into trouble.
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, in a deal initially valued at $1.52 billion in cash and WPP stock. Under that pact, either side could cancel the deal if it doesn't close by nine months later -- June 11, 2005.
Under revised terms signed by the companies and filed with the Securities and Exchange Commission Dec. 1, either side can walk away if the deal doesn't close after 11 months -- Aug. 11.
WPP had no comment today and Grey wasn't available for comment late Dec. 1. But the slight change could be tied to an antitrust review. The change in terms came a week after the deal ran into an unexpected obstacle when the European Commission, Europe's antitrust regulator, asked for more information from WPP.
Grey had expected to wrap the sale in January, but the European Commission's move could delay the closing. European regulators conceivably could reject the deal if they saw insurmountable antitrust issues, though that seems unlikely. U.S. regulators already have approved the merger.
$56 million termination fee
Under terms of the merger, Grey can cancel the deal before next August by paying WPP a termination fee of $56 million. The contract allows WPP to cancel the merger before August if Grey's board "withdraws, modifies or adversely changes" its recommendation that Grey shareholders vote for the deal; or if Grey's board recommends shareholders vote for an acquisition proposal from someone else.
The stock market is betting the deal will happen. WPP's share price has risen since the deal was signed in September, so Grey shareholders are set to get cash and WPP stock worth $1,117 a Grey share based on WPP's Dec. 1 price, or $1.69 billion. That's up from $1,005 a Grey share or $1.52 billion when WPP announced the acquisition in September. Grey stock hit a record price Dec. 1, closing up $12.98 at $1,110 a share.