Fitch affirms WPP

Fitch Ratings said it affirmed WPP Group plc's senior unsecured rating at BBB following the company's agreement to acquire Grey Global Group Inc. for a net consideration of $1.309 billion.

The outlook remains stable.

The acquisition, which is anticipated to be completed in late 2004 or early 2005, is to be financed by 50% cash consideration and 50% equity.

"This will increase net leverage in the short term. However, this is expected to reduce as the benefits of the integration of the two businesses kick in," said Susan Hunter, director at Fitch.

Management has stated that the acquisition will be accretive to earnings in fiscal 2005. Fitch said it will closely monitor the ability of WPP to convert operational improvements into cash flows. Holders of Grey's $150 million 2033 contingent convertible subordinated debentures may exercise their right upon change of control at a conversion price of $961.2. Full conversion is assumed in the $1.309 billion acquisition price. However, Fitch said that this is unlikely given the 5% yield that the holders currently enjoy.

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