WPP at £6bn may look like a bargain for someone – even its former boss

In the small print of S4 Capital’s 2019 results announcement it helpfully reminds us that WPP (the company Sir Martin Sorrell founded 35 years ago and left abruptly in 2018) is now worth less than £6bn (£5.86bn this morning), compared to £16bn when Sorrell departed in April 2018.

Shareholders (who include Sorrell and his family charity) have taken a pounding. As have most shareholders anywhere thanks to the Covid-19 coronavirus but WPP’s travails long pre-date this. We read sometimes of “coronavirus kindness’ on the part of business but, somehow, doubt that this operates in the world of mergers and acquisitions.

On the good news front it seems that WPP has retained its lead creative role on the HSBC account, a long-time JWT client that now resides in Wunderman Thompson. This may give the shares a small boost (a loss would probably have hammered them.)

WPP is still trading profitably although profits were down in 2019 from over £1bn to £982m. It still keeps over 100,000 people around the world gainfully employed and turns over nearly £13bn less costs. But the shares (pre-virus) kept falling despite a number of “buy” notes from banks. The esteemed Motley Fool has even bought some , while acknowledging he (or she) is attracted by WPP’s generous dividend yield of 5.6 per cent (many times what you’d get from your bank.)

In a different world a valuation of £5.86bn would have predators circling WPP. Admittedly they’d have to pay a buyer’s premium but, in the world of big business, it’s not that much. Rival Publicis Groupe (which arguably had a worse 2019 than WPP) paid $4.4bn (dollars) for data business Epsilon.

It may be that no trade buyer or private equity raider wants to take on the whole of WPP, still a rambling empire that’s taxing the organisational abilities of CEO Mark Read and his team. But a break-up bid or even a full merger with one of its rivals must be on the minds of a banker or two.

Sir Martin Sorrell’s new S4 Capital is valued at £600m now (down from the heady heights of £1bn a few months ago), a tenth of WPP’s valuation after just two years. In the old days SMS wouldn’t have been frightened of buying something ten times as big, he did it in the 1980s when Wire and Plastic Products bought JWT.

There’s a thought. As if Mark Read didn’t have enough to worry about.

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