WPP has completed its long expected merger with Australia’s STW Communications Group, increasing its shareholding from 23 per cent to 61 per cent. The deal creates a group containing 75 companies, including all the big WPP agency brands, with sales of about $850m and headline profit of $147m, regulators permitting.
That may be an issue as the combined entity will be by far the biggest marcoms operator in Australia and New Zealand.
STW chief executive Mike Connaghan (left), who will run the new entity, says: “We will be big, but the Australian market is very competitive, all the big international holding companies are here at scale and there’s a thriving local ad industry and a local start-up of digital businesses all over the place..(WPP has) been our natural partner for some time. Over that time we’ve had lots of good years and lots of bad years and I think we’ve got momentum on our side now.”
WPP CEO Sir Martin Sorrell says: “The merger of our Australian and New Zealand operations with STW, will give us a unique opportunity to offer our local and international clients a comprehensive set of services and to make sure we can offer the best talent through country management. It will also enable STW to focus on the Australian and New Zealand markets, which it knows best, with a structure that will strongly incentivise its people.” Australia and New Zealand will now become WPP’s fifth-biggest national market behind the US, UK, China and Germany.
STW has struggled in recent years despite its size with a fraught relationship with WPP one of the reasons. Australia is a notoriously difficult market for foreign interlopers to crack although Omnicom’s Clemenger network and Publicis Groupe’s Leo Burnett have been successes. WPP has had big problems with its giant media agency MediaCom, having to reimburse some clients media owner rebates it received.
Earlier this year David Droga’s Droga5 pulled out of Australia when it decided to close its Sydney office. At one point this employed 300 people.