March 8 (Bloomberg) -- Fidelity International and Knight Vinke Asset Management LLC rejected a sweetened 7.5 billion-euro ($8.9 billion) offer for VNU NV from a group of buyout firms including Blackstone Group and Kohlberg Kravis Roberts & Co.

Knight Vinke, which together with Fidelity helped lead a shareholder revolt at VNU last year, said in an e-mailed statement the offer ``substantially undervalues'' VNU. Haarlem, Netherlands- based VNU, which owns the Nielsen television rating service and Billboard magazine, accepted the buyout group's offer earlier today.

The New York-based private equity firms bid 28.75 euros a share, above the 28 euro to 28.50 euro range indicated in January. VNU shares declined 1 cent to 27.35 euros in Amsterdam on concern the purchase won't go through.

``There won't be a deal at all if two or three large shareholders don't agree with the current bid,'' said Sander Van Oort, a media analyst at F. van Lanschot Bankiers in Den Bosch, Netherlands.

Fidelity International, which held about 15 percent of VNU as of November, ``is unlikely to support the offer,'' said spokesman Richard Miles. The purchase offer is ``conditioned'' on 95 percent of shareholders tendering their shares, VNU said in a statement today.

Moody's Investors Service downgraded VNU's senior unsecured long-term debt rating to Ba1 from Baa2 and assigned a Ba1 Corporate Family Rating to the company, citing the VNU board's acceptance of Valcon Acquisitions' offer to buy the company. All of the company's ratings are under review for further possible downgrades, Moody's said in an e-mailed statement.

`First Reactions'

VNU became vulnerable to a takeover after Knight Vinke, Fidelity and Templeton Global Advisors Ltd. forced the company to abandon a $6.3 billion purchase of IMS Health Inc. in November. The IMS deal's collapse also prompted the resignation of VNU Chief Executive Officer Rob van den Bergh. He is now expected to leave when the buyout deal is completed, VNU said today.

``First reactions don't mean anything,'' Van den Bergh told analysts in London, in response to the Fidelity and Knight Vinke statements. ``In the next four to eight weeks there will be a lot of meetings with the key shareholders,'' involving both VNU and the buyout firms.

Knight Vinke today called for two of the company's main units to be split off and sold separately. The firm has a VNU stake of ``under 2 percent,'' said spokesman Martin Forrest. Knight Vinke last month lobbied VNU to try for a higher price by breaking itself up.

Breakup Proposal

Knight Vinke's ``preferred option'' is for VNU to sell its media measurement and business information units, coupled with an ``ambitious'' restructuring of the marketing information unit that includes ACNielsen, the fund manager said. The benefits of keeping the media information and marketing units together ``are less significant than portrayed by VNU's management,'' it said.

Templeton declined to comment, said Lisa Gallegos, a spokeswoman for Franklin Templeton Investments in San Mateo, California.

VNU Finance Director Robert Ruijter said in an interview he was ``pleased'' with Fidelity's statement because the investor used the word ``unlikely.'' ``They don't come out fully against it,'' Ruijter said.

Ruijter declined to comment when asked at a London analysts meeting whether the buyout group would be willing to acquire control of VNU as a publicly traded company if less than 95 percent of shareholders approve the deal. That was a matter for the buyout group to answer, he said.

Buyout Group

VNU's agreement ended almost two months of speculation whether the buyout group would make a formal bid. The group with Blackstone and KKR also includes Amsterdam-based AlpInvest Partners NV, Washington-based Carlyle Group, San Francisco-based Hellman & Friedman LLC and Boston-based Thomas H. Lee Partners LP. London- based Permira Advisers Ltd. pulled out last month.

VNU is the biggest buyout announced this year. Buyout firms, flush with cash after raising a $134 billion for new takeover funds last year, have announced a record $61.5 billion of deals globally so far this year, according to data compiled by Bloomberg.

The buyout group said in the release it intends to keep VNU ``substantially together as an integrated company.'' Hugh Morrison, a spokesman for the group, declined to comment beyond the statement.

Under the terms of the offer, the company can't be broken up for 18 months, VNU's Ruijter told analysts in Amsterdam. ``We strongly believe that the valuation of VNU taken as a whole is greater'' than being split apart, he said.

Cost Savings

VNU won't pay a final dividend on its common shares, the company said today.

``The dividend was 55 cents last year and we expected the same this year, so the bid's in the middle of the range if you take out the dividend,'' said Oskar Tijs, an analyst at Kempen & Co. in Amsterdam. VNU in August announced an interim dividend of 12 cents.

VNU said today it aimed for 125 million euros of annual cost savings by 2008. That figure makes the buyout price seem ``more attractive'' for the private equity group and less appealing for shareholders by lowering the effective multiple to earnings paid, Tijs said.

To contact the reporter on this story: Charles Goldsmith in London at cgoldsmith3@bloomberg.net .