FRANKFURT U.S. private equity firm Kohlberg Kravis Roberts (KKR.N) launched a tender offer on Thursday for a stake in Germany's GfK (GFKG.DE), teaming up with the faltering market research firm to develop new computer-based strategies and fend off competition.
GfK's majority shareholder, GfK Verein, will hold on to its 56.46 percent stake under the agreement but said it would support the technological overhaul proposed by KKR, which has a track record of successfully turning around media and market research businesses.
The announcement that KKR-controlled Acceleratio Capital NV would offer 43.50 euros ($46.77) per share in cash for all outstanding GfK shares sent shares in the German company surging by 30 percent.
GfK is best known for its consumer confidence indices and TV audience ratings, but has struggled to keep up with digital competition and grappled with management issues and declining sales.
GfK's stock fell by 20 percent in August after it warned on 2016 profits for a second time and its chairman and chief executive both unexpectedly resigned due to a falling-out over strategy with GfK Verein, a non-profit thinktank.
Acceleratio Capital said its offer represented a premium of about 44 percent over GfK's three-month average share price before news of the offer, valuing the company at a total of around 1.59 billion euros.
KKR said the deal was conditional on holders of at least 18.54 percent of GfK's shares accepting its offer, resulting in a minimum 293 million euro investment by KKR.
A person close to the deal said the 18 percent threshold would ensure KKR had enough of a stake in the company to allow it to have a say in its future.
It would mean that, together, Acceleratio Capital and GfK Verein would own at least 75 percent of GfK shares.
Consumer research groups such as GfK are feeling the squeeze from small innovative companies that exploit established players' slow adoption of new technologies.
KKR said it saw opportunities to transform GfK into a technology-based market research leader.
GfK said it wanted to focus more on "big data", which involves using computers to sift through huge quantities of data to analyze topics such as consumer demand.
KKR can put its experience of turning around media and consumer research businesses to work.
Back in 2006, the group and five other equity firms paid $10 billion to acquire, overhaul and publicly list what is now Nielsen Holdings (NLSN.K), a U.S. based consumer research group valued at $15.5 billion.
KKR also invested 50 million euros in international music company BMG in 2009 and roughly doubled its investment, cashing in 350-400 million euros for its equity stake when it sold out to Europe's largest media company Bertelsmann (BTGGg.F) in 2013.
GfK said both its management and supervisory boards supported the deal and would recommend that shareholders accept the offer.
A person close to the deal told Reuters that GfK's board had been eyeing options for a stake sale for two years and that the research group had talked to several other interested parties, such as BC Partners.
KKR, which was advised by JPMorgan, did elaborate due diligence, the source said. GfK was advised by Deutsche Bank and GfK's supervisory board by Metzler.
(Reporting by Tina Bellon and Arno Schuetze; Editing by Harro ten Wolde and Adrian Croft)