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MARKET COMMENT
By
Carburton Street, London -- Sir Martin Sorrell is a desperate man. Yesterday saw the Takeover Panel quite rightly reject his plea for WPP (LSE: WPP) to wriggle out of its bid for Tempus (LSE: TSG). Although WPP has subsequently appealed against the decision, the Chief Executive of the advertising giant should accept the consequences of his investment mistake. To recap, WPP tabled a £437m bid for fellow media agency Tempus in August. The offer came just a month after Tempus had agreed to a £425m offer from the French media firm Havas Advertising. But following the events of September 11th, Havas promptly withdrew their offer. That left Tempus shareholders pinning their hopes on Sorrell in a fast deteriorating advertising market. WPP's request to drop their bid centred on a "material adverse change" in the prospects of Tempus after September 11th. But given that WPP actively continued to build its stake in Tempus on September 17th, such a request was always likely to fall on deaf ears. WPP had been keen on Tempus for some time, with the company building a 20% stake in its smaller cousin over the past few years. But whether WPP was just trying to extract a higher price from Havas for its stake is not entirely clear. Assuming WPP did actually want to buy Tempus, Sorrell made some pretty basic investment errors. For starters, where was the long-term view? Sure, the advertising market has deteriorated of late. But what's fundamentally changed at Tempus in the past month or so? Has Tempus changed so much to make the long-term "strategic and financial benefits" that were so "compelling" in August suddenly disappear? But Sorrell's real problem was bidding far too high a price in the first place. By valuing Tempus at 36 times historic earnings, there was no margin of safety in the offer. Over the short-term at least, the pricing left plenty of downside should anything untoward have happened. Indeed, by appealing against the Takeover Panel's decision, Sorrell seems to be compunding his earlier misjudgements. Rather than just face up to buying Tempus, he seems to be in denial of his investment mistake and continues to blame external factors for his error. WPP's spoiler bid always looked cavalier. Like all good investors, Sorrell should now admit a mistake has been made and accept it. He should now be busy rebuilding bridges with the incoming Tempus staff, not arguing over Takeover Panel technicalities.