GfK, the German market research group, is considering an all-cash offer for Taylor Nelson Sofres (TNS) after dropping plans for a nil-premium merger with the British market research group.

The German company made the announcement hours after WPP, the advertising and marketing services giant led by Sir Martin Sorrell, announced a hostile bid for TNS at the same level as its previous £1.1 billion cash-and-shares proposal.

The Times revealed yesterday that GfK and an unidentified financial bidder were preparing a last-minute counter-bid for TNS if WPP made a firm offer by the 7.30am “put up or shut-up” deadline set by the Takeover Panel.

Speculation yesterday centred around GfK joining forces with a wealthy German family. The Quandt family, part-owner of BMW, and the Herz family, which disposed of its stake in Puma last year for €1.44 billion (£1.14 billion), were mooted as potential partners.

GfK said it was “actively pursuing a proposal which would involve an alternative all-cash offer being made for TNS with the involvement of an identified potential source of equity and equity-related financing”. Talks were at an early stage, and GfK added that it had received “a strong indication of interest in this transaction”.

TNS is attractive to potential bidders, partly because of overall growth in the sector and because of its independence from a weak advertising market. Although WPP’s cash-and-shares bid for TNS was unchanged, the offer’s value had increased slightly, to 260.6p per share from 260p per share, as WPP’s shares had risen since the previous week. Shares in TNS soared 26½p after the news of the two proposals and in anticipation of a bidding war for the British market researcher. There had been speculation that WPP could increase its cash-and-shares offer from 260p to 280p per share to tempt TNS shareholders to opt for its deal rather than the nil-premium merger with GfK.

Sir Martin said: “Reluctantly, we have waived our earlier pre-condition for the board of TNS to recommend our offer. Despite repeated efforts over more than three months to engage with TNS management, we have been unable to enter into any discussions that could lead to an agreement. Although our offer may be characterised by some as a hostile bid, we believe that it is in no way hostile to TNS share-owners, nor to TNS’s clients and people. In fact, WPP believes it is more committed to maintaining the TNS brand than GfK.”

Sir Martin said WPP’s offer was superior to what was, in effect, a “nil-premium” reverse takeover of TNS by GfK and a “merger of unequals”. He said the company remained willing to meet the TNS board at short notice.

TNS released a separate statement advising shareholders to take no action in response “to WPP’s latest unsolicited act” and not to complete any form of acceptanc. The board of TNS is to write to shareholders setting out its reasons.

Donald Brydon, TNS chairman, said: “The board has unanimously rejected the offer, which substantially undervalues TNS.”

The company added: “In the light of this rejection [of the WPP offer], TNS has agreed with GfK to terminate the proposed merger and has permitted GfK to advance its discussions with an identified potential source of equity and equity-related financing in connection with an alternative possible offer for TNS as an alternative proposal.” It said that early indications of trading for June showed “a continuation of the group’s strong performance with the order-book for the full year significantly ahead of 2007”.

How numbers stack up

WPP

2007 revenue: £6.18 billion
Market Cap: £5.50 billion
110,000 employees
Clients include: Ford, Altria, American Express, British American Tobacco, GlaxoSmithKline, IBM, Microsoft, Pfizer, Procter & Gamble, Unilever

TNS

2007 revenue: £1.07 billion
Market Cap: £1.06 billion
15,000 employees
Clients include: Procter & Gamble, Toyota, Microsoft, Renault, Unilever, Nissan, HSBC, Volkswagen, Samsung, Barclays

GfK

2007 revenue: €1.16 billion (£920 million)
Market Cap: €800.46 million
9,000 employees
Clients include: Procter & Gamble, Samsung, Unilever, Novartis

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax