Bad news and bad news on black Thursday for WPP Group, the world’s number two advertising and marketing conglomerate. Coinciding with the revelation of a six per cent fall in Q3 revenues, Sir Martin Sorrell learned that Britain's Takeover Panel had rejected WPP's appeal to pull out of its £434 million bid for media buyer Tempus Group.
The panel, a self-regulatory body that adjudicates on merger and acquisition disputes, did not accept WPP’s claim of “material adverse change” in Tempus's prospects following the economic side effects of the September 11 attacks. The panel’s statement also revealed that WPP is considering an appeal against its verdict, and that a further announcement is “likely to be made later today”.
Following the announcement, Tempus shares rose by 15p to £5.25, while those of WPP plummeted initially to £5.41 before recovering to £5.57.
In its third quarter trading statement, WPP warned it would be “very difficult” to achieve its operating margin target of 15% in 2001. The effect of the attacks on its business meant its revenues would fall by at least £20m.
The statement continued: “The combined WPP and Y&R constant currency revenues declined over 3%, mainly reflecting the impact of the tragic events on 11 September 2001 and subsequent developments in the United States. On a like-for-like basis, excluding acquisitions and currency fluctuations, revenues fell by over 6%.”
Most affected by the attacks are WPP’s North American businesses, the ripple effect of which has adversely affected the group's activities in Britain and continental Europe as well as Asia Pacific and Latin America. Hardest hit of all had been WPP’s public relations interests.