What’s behind WPP’s offer to raise its ADK stake?

It’s not so often that you see WPP proffer an olive branch.

Is its offer to raise its stake in Japanese agency ADK (left) from 25 per cent to 33 per cent such a move?

ADK’s management wants to accept a $1.3bn tender bid from Bain Capital. WPP, which has had its stake in ADK for nearly 20 years, thinks the offer is too low (as do some other shareholders) and, anyway, doesn’t want to sell. Not least because then ADK would sell its stake in WPP, worth around $500m, putting further pressure on WPP’s share price, down 30 per cent this year.

With 33 per cent WPP would be just under the threshold at which it can veto ADK board decisions. The 33 per cent move looks more like a big stick than an olive branch as far as ADK’s current leadership is concerned but some shareholders might see it as a way to, finally, get ADK moving on the international stage. ADK says the WPP connection has stymied such opportunities.

Japan should be an important market for WPP, especially with its huge economy on the uptick, although it hasn’t been to date. But the Japanese ad and media markets are dominated by, first Dentsu, and then Hakuhodo. ADK, for WPP, is really the only game in town.

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