Sources close to the deal are expecting the City regulator to rule against WPP and deny its bid to use the "adverse material change" clause. The clause was invoked on the basis that the situation has changed significantly following the dramatic fall in world markets after the events of September 11.
Crucially, WPP's use of the clause is seen to have been weakened by its purchase of a further 3% of Tempus stock after September 11. This raised its stake in Tempus from the 22% it bought earlier this year to 26%.
If the Takeover Panel does turn down the WPP CEO Sir Martin Sorrell, he still has the option of appealing to the full panel. This would ensure that the saga dragged on for another week.
Today will also see the European Commission rule on whether the takeover of Tempus by WPP is anti-competitive. It is expected to approve the deal, closing another avenue of escape for Sir Martin.
On Thursday, WPP will reveal its third-quarter results. The results will be closely watched as they will give one of the first indications of how the downturn, exacerbated by terrorist attacks in the US, have affected the big advertising groups.
Last week, Morgan Stanley cut its earnings expectations for WPP ahead of the third-quarter results. The investment bank reduced its 2001 earnings-per-share estimates by 6% to 29.5p from 31.3p and cut its estimates for 2002 to 28.9p from 35.3p.
The Tempus board last week said that it sees no grounds for allowing WPP to invoke the material adverse change condition. Tempus said that having seen the WPP submission to the Takeover Panel, it was firmly of the view that "there are no grounds for allowing the material adverse change condition to be invoked".
Tempus said it had set out the reasons why it is firmly against the view that there are grounds for invoking the material adverse change clause.
Earlier last week, WPP extended its bid until October 22 while it continued talks with the regulator.
For the argument to be successful, the Takeover Panel will have to see evidence that profits are set to dive at Tempus by at least 20%. Analysts are suggesting that Tempus may be down by only 10%.
It has already emerged that shareholders in Tempus have threatened WPP with legal action if it attempts to abandon the £432m bid to buy the company.
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