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ECONOMY

Outbid, GfK calls off approach for British rival

German market research group GfK on Wednesday said it was no longer mulling an all-cash offer for U.K. peer Taylor Nelson Sofres after it was upstaged by high-profile advertising group WPP.

Nuremberg-based GfK said it was unable to line up financiers that would allow it to trump WPP’s £1.1billion (€1.4 billion) offer.

“The management board, after careful consideration, has concluded that the terms of the financing available did not enable a sufficiently compelling alternative cash offer to be made for TNS that was also economically in the best interests of the GfK shareholders,” the company said.

GfK and TNS in April proposed a null-premium merger that would have given control of GfK to TNS and created the world’s No. 2 market research company behind Nielsen. But that announcement sparked WPP, run by celebrity executive Martin Sorrell, to launch a cash and share counter offer for TNS.

GfK then began scrambling to find a deep-pocketed partner to back an all-cash approach. Although GfK refused to name potential financiers, German press reports said it approached private equity group Apax Partners and the heirs to the Tchibo coffee fortune.

TNS Tuesday reiterated its rejection of the WPP offer, noting “previous acquisitions in the sector have valued target companies above WPP’s valuation of TNS.”

Investors approved of GfK’s decision – the shares traded 4.7 percent higher in late morning Frankfurt trade at €24.31. However, with the prospect of a bid battle off the table, TNS shares fell 1.8 percent to 264.00 pence in London. WPP was off 1.1 percent at 501 pence.

GfK’s proposed bid was also controversial among members of the market research association that owns a majority of the company. Some members feared the group would lose its German voice was others fretted at the possibility of job losses in the southern German state of Bavaria, where GfK is based.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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