Sir Martin Sorrell, the founder of WPP Plc, the world’s largest advertising and PR group,has said that the probable break-up value of WPP is the central reason why he continues to retain approximately US$210 million worth of the ad group’s shares.
Sorrel was responding to anchorman Steve Sedgwick on CNBC last week when asked if he thought WPP had outlived its purpose and why he had chosen to remain a shareholder.
Sorrell is WPP’s largest individual shareholder with a 1.4% stake. Sorrell said that WPP “has to change violently”, adding that “what’s really interesting” is the value of Group M — the media planning and buying part of the group.
In Sorrell’s evaluation, Group M is “probably worth about $15bn”, on a par with the market value of the group as a whole.
Earlier this week, WPP’s market capitalisation stood at £12.21bn or about $15.05bn.
“Now, there is some debt there, so the enterprise value is higher,” Sorrell hastened to add, “but the answer to your question is the break-up values of these companies, or the market values, are approaching levels which we haven’t seen for some time. Publicis bought Epsilon for $4bn. In Q2, their revenues are down 4%. Credit Suisse came out with a note downrating them yesterday. That’s, what, a month after announcing the acquisition — so the pressure in the legacy sector is huge.”
Sorrell was particularly keen to throw into relief “the legacy sector” against his new venture S4 Capital that focusses on growth sectors, such as digital production and media.
“You know, we have a clean sheet of paper at S4, our top line is growing 40%, 45%, accelerating into the second half of the year,” he said. “You look at the statistics around the US ad market — IPG came out with statistics for the first half — market’s up 6%, digital up 20%, traditional is down 3%. So managing the transformation and the change is key,” added Sorrel.
Yesterday, Sorrell unveiled a £100m share sale to fund a raft of takeover deals as his new venture approaches the £1bn valuation mark.
It is reliably learnt that S4 Capital, which Sir Martin launched last year after his retirement from WPP, will inform the London Stock Exchange of the launch of a placing and open offer.
Additionally, it is learnt that part of the proceeds will be directed to finance the takeover of Firewood, currently the largest marketing agency in Silicon Valley.
Founded in 2010 and presently employing more than 300 staff in the UK, Ireland, Mexico, and the US, Firewood focusses on digital creative campaigns for clients that include giants such as Google, Facebook, VMWare, cloud software provider Salesforce, LinkedIn, and the navigation app Waze.