WPP delves into opponent ADK’s animation business

WPP has responded with its customary energy to Japanese agency ADK’s rebuttal of its arguments against a $1.3bn sale to Bain Capital (we publish these things verbatim because they are quite entertaining – it’s quite rare to see such a public row):

WPP wishes to make it crystal clear that ADK have rarely, if ever, responded to suggestions to generate synergies during our relationship. As a 24% shareowner, WPP has never been in a controlling position and ADK have consistently refused to focus or expand their Japanese operations digitally or restructure their overseas operations, which have consistently lost money, concentrating instead on unsuccessful animation and content acquisitions.

ADK indicate they have approached others. They should clarify immediately the number of strategic and financial parties they have made meaningful approaches to, and the extent of those discussions and deliberations. WPP is aware of at least one approach that was frustrated by management. It was a serious approach but ADK’s management made it quite clear that they were not prepared to discuss the matter further. Were these approaches fully discussed at board level?

To WPP’s knowledge Bain has made promises in relation to management continuity and the price negotiated by Bain was not a very demanding one, given the intrinsic existing value. This is a view shared by at least three shareholders publicly, so far, and representing approximately 40% of the issued share capital.

ADK have known for some time that there are further conditions to any termination of the alliance with WPP and on a previous occasion when ADK sought to terminate the agreement, they were unable to do so.

The sale of WPP stock will trigger a significant capital gains tax liability and shareowners have consistently told ADK’s management that it would unwise to do so. Bain now says that the main purpose of the transaction is the value of ADK’s animation business and assets (below). Is Bain aware of the details surrounding the animation business? If so, all such details should be released to other potential bidders forthwith.

WPP has tried for many years to find out the scope and the scale of the profitability of the animation business (below) without success. What is it?

ADK’s next rejoinder should be interesting. As to the animation business, animation is a big thing in the region (and not just for kids) and ADK has ventured into the Chinese market. But should an agency be doing it? The much bigger Dentsu seems to do just about everything – including overwork its employees. And WPP, an investor in The Weinstein Company, is hardly averse to a diversification or three.

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