WPP to go to trustee for Grey Global convertibles after holders reject merger treatment

New York, Jan. 27 - WPP Group plc said it will submit its proposed treatment of Grey Global Group Inc.'s $150 million of 5% contingent convertible subordinated debentures due 2033 to the trustee for the securities after failing to reach agreement with investors.

WPP said it has been in discussion since Dec. 16 with a committee representing holders of $125 million of the convertibles over the treatment of the debentures under WPP's acquisition of Grey Global.

But on Jan. 25 the committee rejected WPP's latest proposal and WPP said it will submit proposed amendments to the convertible indenture to the trustee as part of the closing requirements of the merger.

Under terms of the merger agreement, the debentures will be convertible into the consideration that is received by a non-electing shareholder. Because of the increase in WPP's stock price since the deal was announced, non-electing shareholders could receive all cash.

However, the convertible committee claims this treatment is inconsistent with the terms of the indenture and has threatened litigation, WPP said in a 6-K filing with the Securities and Exchange Commission.

While WPP believes the treatment is in line with the indenture, it has held talks with the committee.

Under its most recent proposal, WPP would, with the consent of convertible holders, enter into a supplemental agreement with the following terms:

* 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 be putable at par in October 2013;

* The debentures would be convertible after the merger at any time. The contingent conversion feature would be eliminated;

* Adjustments to the conversion rate for dividend payments after the merger would be the dividend per WPP ordinary share for 2004, increasing by 15% annually after that;

* WPP would pay 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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