A&O pursues get-out for WPP in Tempus takeover

Allen & Overy (A&O) appeared last week to be trying to find a last-ditch get-out clause for its client, advertising firm WPP, to extricate it from the takeover of Tempus.

WPP had offered Tempus shareholders 555p for every share held in the media buying agency and about 94 per cent of shares were in the bag by last Monday's deadline (1 October). Since the terrorist attacks of 11 September, however, the sector has seen a significant global downturn which explains the stampede of shareholders desperate to sign-up for WPP's offer.
Rather than moving to an unconditional offer last Tuesday (2 October), WPP released an announcement indicating that the offer remained subject to both regulatory approval and “no material adverse change or deterioration” affecting their target. As the offer would normally move to an unconditional phase at this point, it looks as if the company is looking for a way out.
The WPP escape attempt is in the hands of A&O's team of Mark Gearing and Tim House, with Tempus represented by Martin Taylor, Ben Spears and Damian Scholefield of Freshfields Bruckhaus De-ringer. Slaughter and May will also be interested in the outcome because it represent Havas, a former suitor for Tempus, which allowed an earlier takeover bid to lapse.
Prevailing legal opinion is that the A&O team faces an uphill struggle – there are no immediately obvious regulatory impediments to the deal and examples of the takeover panel allowing a bidder to abandon an offer on grounds of material adverse change are very thin on the ground.
Davis Service Group was let off the hook over its bid for Sketchley in the early 1990s, but the change related to the financial conditions within the company rather than a downturn in the general economic climate. A&O may also find itself hampered by the fact that WPP continued to purchase Tempus shares subsequent to the events of 11 September.
Neither A&O nor Freshfields would comment on the developments and intensive negotiations are underway. The issue should be decided by 22 October at the very latest, but even if A&O pulled off an escapologist's trick for its client, it may not be the end of the matter.
No offers for Tempus will be made by the Tempus board, leaving alternative suitor Havas and its law firm Slaughter and May in a tricky position.