Grey Global, WPP reach agreement with holders of 80.5% of Grey's convertibles

New York, Feb. 25 - Grey Global Group Inc. and WPP Group plc said they reached agreement with holders of 80.5% of Grey's 5% contingent convertible debentures due 2033 on the post-merger treatment of the securities.

The investors have agreed to deliver consents in a solicitation while the companies have agreed to conduct the solicitation.

The two sides had been at loggerheads over the terms of the convertibles following WPP's planned acquisition of Grey, with a committee representing holders threatening litigation and WPP threatening to go direct to the trustee for the debentures.

The agreement is contained in a support agreement between Grey, WPP and Akela Capital Master Fund, Ltd., Aristeia Capital LLC, Drake Management LLC, Harbert Convertible Arbitrage Master Fund, Ltd., Harbert Convertible Arbitrage Master Fund II, Ltd., Radcliffe SPC, Ltd., Sage Capital Management, LLC, Silvercreek Management Inc., and Tenor Capital Management Co., LP.

Under the agreement, the consent fee in the solicitation will be $23.33 per $1,000 principal amount.

Among the changes to be made in the solicitation, following the merger the convertibles will be putable at par on Oct. 28, 2008, Oct. 28, 2010 and Oct. 28, 2013.

After the merger, each $1,000 principal amount will be convertible into a combination of cash and stock. The cash component will be $1,045.60 multiplied by one minus the pro-ration factor, which is the proportion of Grey shares converted into WPP stock in the merger, with a floor of 0.5. The remainder - $1,045.60 multiplied by the pro-ration factor - will convert into stock at $8.84 per WPP ordinary share.

There will be dividend protection through a conversion ratio adjustment.

Under the previous proposal, WPP was proposing that each debenture would be convertible after the merger into $522.50 in cash and 11.31227 WPP American Depositary Shares. This represents 50% of the $1,005 cash consideration and 50% of the share consideration of 21.746 WPP ADS payable in the merger for each Grey share, multiplied by 1.0404, the number of Grey shares for which each Debenture is currently convertible; the convertibles would have been putable at par in October 2013; adjustments to the conversion rate for dividend payments after the merger would have been the dividend per WPP ordinary share for 2004, increasing by 15% annually after that; and WPP would have paid a consent fee of $10.00 per $1,000 principal amount to consenting holders.

Grey Global is a New York advertising firm. WPP is a London advertising agency.

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