WPP boss Sir Martin Sorrell (below), who’s fighting on a number of fronts at the moment, likes nothing more than a good old-fashioned takeover battle and he’s in another although this time on the receiving end – Bain Capital’s $1.3bn tender offer for Japan’s ADK agency.
WPP has a 24.5 per cent stake in ADK while ADK owns 2.4 per cent of WPP, nearly $600m worth.
In a statement WPP says the offer “significantly undervalues ADK, as other shareholders have subsequently stated both publicly and privately.
“Secondly, have the Board ever considered or discussed any alternative bona fide offers or proposals for the company which may be of greater benefit to the stakeholders in the business including its clients and its people or has the only consideration been management’s concern about their own position in the future? Has Bain Capital ever given ADK’s management reassurance about their own position as part of this transaction and, if so, should not those terms be disclosed?
“Thirdly, ADK’s management have consistently resisted opportunities to improve the performance of its overseas operations and exploration of significant digital opportunities, preferring to invest in disastrous acquisitions and consolidations such as Gonzo and Bungeisha, the costs of which have not been fully exposed, along with the disposal of DAC in 2011 at a lower price than WPP’s indication and the reduction of ADK’s stake in Video Research Interactive.
“Finally, ADK has improperly attempted to terminate its co-operation and business alliance agreement with WPP, which it knows full well that it cannot do, as on previous occasions it had abided with this instruction.
“ADK’s effective sale of its holding in WPP has attempted to circumvent the stock purchase agreement and contradicts explicit advice from key shareholders that doing so would trigger damaging and ill-advised tax charges. Others have also noted the cancellation of dividends promised on August 17 2017.”
It seems fair to say that Sorrell and WPP are cross. The latter reference to the stock purchase agreement and “ill-advised tax charges” is probably the key.
We don’t know yet what outcome WPP hopes for. A bigger offer is obviously one but that wouldn’t help on the tax charges front. ADK, Japan’s third biggest agency, albeit much smaller than the mighty Dentsu, is important strategically for WPP which needs to be in Japan. Let’s say ADK is really worth $2bn, in which case WPP could easily bid itself. But Bain could raise the stakes too. More likely would be WPP teaming with another private equity house, as it did with Providence Equity Partners for the UK marcoms group Chime.