We haven’t heard much from WPP boss Sir Martin Sorrell (left) recently but today (Sunday March 15) it’s emerged that he stands to pick up £36m from WPP’s notorious Leap executive rewards scheme (the members of which, who include CFO Paul Richardson, stand to trouser a total of £70m) and that WPP is in the driving seat to take a majority stake in Tesco’s Dunnhumby customer research business, valued at £2bn in total.
The two events may not be entirely unrelated.
WPP’s Leap scheme has been amended following shareholder opposition. But it still stands to pay out until 2017, by which point Sorrell (who needs to buy shares to fuel the thing) may have gained about £100m of extra WPP shares to add to his already considerable shareholding.
Dunnhumby powers Tesco’s Clubcard data operation but also works for other big global clients including Coca-Cola and Procter & Gamble. Essentially it enables big companies to target their retail promotions more accurately. Tesco, now run by former Unilever man Dave Lewis, seems to prefer a trade sale enabling Tesco to keep a minority stake against an outright sale or an IPO.
WPP’s data operation, mostly grouped under Kantar but with substantial bits in GroupM’s Xaxis and investments in the likes of AppNexus and ComScore, now accounts for about a quarter of its £12bn revenue. WPP shares have risen recently on the back of record profits of £1.5bn. Dunnhumby should provide a significant boost to its revenues, akin to the leap in digital revenue rival Publicis Groupe is expecting from its $3.7bn takeover of US techno firm Sapient.
So far WPP’s data operations have not delivered the profits its ad and media agencies do. But shareholders will probably buy a deal which gives WPP a big stake in established data business Dunnhumby. A not inconsiderable side benefit is that it will bring WPP closer to Tesco. WPP’s MediaCom is currently pitching for Tesco’s £100m UK media business.
They may not be quite so happy about Sorrell’s latest humungous pay cheque. But, beyond some moaning and groaning, it’s hard to see what they will do about it.