July 3 (Bloomberg) -- Taylor Nelson Sofres Plc, the U.K. market-research company that agreed to merge with Germany's GfK AG, rejected a fourth unsolicited takeover offer from advertising company WPP Group Plc.

The 1.08 billion pound ($2.1 billion) bid, which valued Taylor Nelson at 260 pence a share, ``substantially undervalues'' the company, London-based Taylor Nelson said in a statement.

``WPP's successive approaches and considerable press commentary and innuendo collectively represent an attempt by WPP purely to frustrate the merger of GfK and TNS,'' according to the statement.

WPP, which made 37 acquisitions last year, is seeking to combine Taylor Nelson with its Kantar research unit. Kantar's strength in the U.S. market would complement that of Taylor Nelson in Europe and both are ``strong'' in Asia and Latin America, WPP said today.

WPP offered 173 pence in cash and 0.1889 WPP shares for each Taylor Nelson share. The per-share value is 16 percent above yesterday's closing price for Taylor Nelson and 52 percent above the closing price on April 28, the day before Taylor Nelson's statement about the planned merger with GfK.

Taylor Nelson shares fell 0.9 percent to 223 pence as of 8:25 a.m. in London trading while WPP shares dropped 1.5 percent to 453.5 pence.

Taylor Nelson is the ``only quoted, independent, diversified operator in the market information sector,'' according to the Taylor Nelson statement. Such a ``unique company'' should ``command a commensurate premium valuation,'' Taylor Nelson said.

WPP's Stance

WPP will only make an offer for Taylor Nelson if it gets a unanimous recommendation from Taylor Nelson's board, WPP said in a statement today. Asked about Taylor Nelson's rejection of the bid, WPP Chief Executive Officer Martin Sorrell told reporters on a conference call today, ``What we are doing is putting this to the market.''

Taylor Nelson agreed on June 3 to merge with Germany's GfK to form the world's second-biggest market research company and challenge Nielsen Co. Shareholders of Taylor Nelson and GfK would each hold about 50 percent of the new entity, to be called GfK- TNS Plc, the companies said. Taylor Nelson will issue 11.74 new shares for each GfK share.

Sorrell told Bloomberg News on June 7 that the merger plan of Taylor Nelson and GfK was ``troubling'' because the companies forecast synergies that ``aren't realistic.'' The 15 percent operating profit margins predicted by Taylor Nelson and GfK ``don't exist in the industry,'' he said then. ``My best guess is all they can get is 12 percent.''

Higher Margins

Sorrell said today that a combination of Kantar and Taylor Nelson would generate ``industry-leading margins'' and that he would seek an operating margin of about 13 percent in the medium term.

Margins at a combined Kantar/Taylor Nelson entity could be improved through the consolidation of Internet panels, elimination of duplicative public company costs, procurement saving, and lower costs for technology and other organizational and operational efficiencies, WPP said.

These measures could help to cut annual costs by at 52 million pounds before tax by 2011, WPP said. Taylor Nelson reiterated on June 25 that the merger with GfK will result in annual cost savings of at least 97 million euros before tax by the end of the third full year after completion.

Taylor Nelson and GfK had combined revenue of $3.9 billion last year, while New York-based Nielsen had sales of $4.7 billion. Taylor Nelson researches consumer habits for clients including Procter & Gamble Co. and Nestle SA, while GfK provides the GfK German consumer confidence index.

New York-based Omnicom Group Inc. is the world's largest advertising company.

To contact the reporters on this story: Simon Thiel in London at sthiel1@bloomberg.net;

Last Updated: July 3, 2008 03:33 EDT