WPP acquires majority stake in STW

Highly anticipated advertising merger finally signed.

Global communications giant WPP has signed a merger deal with ASX-listed STW Communications, bumping its stake up to 61%.

STW was valued at $A512 million and will issue shares to WPP at $A0.91 per share, a 30% premium on the Friday trading halt.

STW and Martin Sorrell-led WPP both have a significant presence in New Zealand. Together they own Ogilvy & Mather and JWT; STW owns Assignment; and WPP owns Y&R and GroupM agencies.

A statement to the ASX says the merged group will have normalised net assets of $A847 million and earnings before interest and tax of $A142 million.

There will be savings of at least $A15 million per year as a result of the deal, but STW is insisting there will be no redundancies for the group’s 5,500 employees.

STW chairman Robert Mactier and chief executive Mike Connaghan will both remain in their roles.

They welcomed the deal, saying it would add value to clients and shareholders.

“Bringing together the respective iconic brands and wonderfully talented people of STW and WPP Australia and New Zealand under a single common ownership will unlock tremendous local and global capability, experience and efficiencies for our clients as well as establishing a fantastic platform for our people to prosper,” Mr Mactier says.

Mr Connaghan says WPP has been a “fantastic partner” since the companies came together to create Singleton Ogilvy & Mather in 1998.

“Since then we have had great success in Australia and New Zealand partnering in J Walter Thompson, Added Value, Mindshare and Maxus. I believe this deal makes great sense.”

STW has been facing financial difficulties in the past couple of years, with shares falling 22% in the past year to $A0.73.

 

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