Speaking this morning, WPP CEO Sir Martin Sorrell said that no decision had yet been taken on whether to appeal against the ruling. It is understood that an appeal against the panel's decision not to allow the use of the adverse material change clause could take about a week.
WPP is under no obligation to go through with the deal on the basis of the panel's ruling, which is not legally binding. However, sources were suggesting yesterday that WPP will bite the bullet and go ahead with its £432m bid to buy Tempus. This week, Deutsche Bank said it believed WPP could swallow the deal, and put its shares on its European focus list.
WPP was trading up by 5.7% to 591p at 10.50am, having opened at 559p. On the back of the Takeover Panel's ruling that WPP can not invoke the material adverse change clause, Tempus was also up. Its share price rose 2.9% to 525p.
Analysts today were more concerned with the full-year outlook than the eventual outcome of the Tempus deal.
Lorna Tilbian, media analyst at Numis, said, "The third-quarter figures, which were well-received, and the reassuring outlook for the full year are more important to WPP today than the outcome on Tempus. And anyway, even at this price, Tempus longer term will add value to The Media Edge offering."
Tempus's share price is fast clawing its way back to the 555p offered by WPP for the media buyer. Earlier this week, WPP extended its offer for Tempus until October 29.
WPP appealed to the Takeover Panel on October 10, asking it to invoke the material adverse change condition. WPP argued that the situation had been significantly changed by the events of September 11 as world markets fell.
WPP lodged a formal submission with the panel setting out the reasons why it believed that it should be permitted to invoke the material adverse change clause. This submission was made available to Tempus and, on October 16, Tempus made its own submission arguing why it believed that there were no grounds for allowing WPP to invoke the clause.
Earlier this week, WPP announced that it had new information, which it was using to support its case. However, it was not enough. The Takeover Panel said this morning that having considered each of the submissions received and the further representations made, the panel executive ruled that WPP should not be permitted to invoke the clause.
The panel's decision came as WPP announced its third-quarter results and warned that it would not be able to hit its 15% operating margin objective.
WPP said it estimates that the impact of the events of September 11 and beyond on the last three weeks of that month alone reduced revenues by at least £21m, without any opportunity to reduce operating costs.
It said if the last three months of the year were impacted in the same way, like-for-like revenues for the whole of 2001 could be down 2%.
It said third-quarter revised forecasts for the year indicate that it will be very difficult to achieve the group's operating margin objective of 15% in 2001. It noted, however, that the position would be different if the impact of the events of September 11 and beyond is excluded as exceptional items, as some companies within and outside the advertising sector are doing or planning to do.