WPP Gains Most in Decade as Asset Sale Speculation Picks Up
(Bloomberg) -- WPP Plc rose the most in almost a decade as investors looked beyond its lack of growth and focused instead on possible asset sales following the departure of founder Martin Sorrell.
The world’s largest advertising company pledged that interim co-chief operating officers Mark Read and Andrew Scott would undertake a strategy review while delivering first-quarter financial results that beat analysts’ estimates. Executives spent a subsequent meeting with analysts playing down expectations for a breakup after media reports over the weekend that it’s considering the sale of its market research unit Kantar.
“We will be keeping an open mind and will always go where value is for shareholders,” Executive Chairman Roberto Quarta said at the analyst meeting in London. “The starting point is not a breakup.”
WPP’s interim managers are signaling they’ll move quickly to position the business differently following Sorrell’s abrupt departure as chief executive officer this month, as the company looks for his replacement. Analysts have speculated that the network of more than 400 agencies could be broken up or that the company could pursue more modest asset sales as it battles a decline in ad spending by key clients such as Unilever and Procter & Gamble Co. and seeks to fend off new rivals.
The shares surged as much as 9.7 percent, the most intraday since December 2008, and were up 8.1 percent at 1,241 pence as of 11:10 a.m. in London.
“The stock rise is entirely due to the fact that the breakup story is playing out, but even faster than we had anticipated,” said Alex DeGroote, an analyst at Cenkos Securities.
Over the weekend, the Times reported that managers of WPP’s market research group Kantar are considering a management buyout of the unit.
The business has also attracted preliminary interest from private equity firm CVC Capital Partners, according to a person familiar with the matter, confirming a Financial Times report.
A representative for CVC declined to comment. Eric Salama, CEO of Kantar, declined to comment.
In an interview, Read said that while it’s too early to speculate on specific asset sales, WPP could consider parting with minority stakes in businesses. Under Sorrell, WPP bought minority stakes in an array of digital, media and marketing companies, including a 15 percent holding in ad-tech firm AppNexus Inc. and a slice of global youth media outlet Vice Media LLC.
“We’re taking a fresh look at strategy -- the focus is on how we can get growth,” Read said.
Read said he’s focused on retaining top clients including Ford Motor Co., which has put its global creative account up for review, as WPP addresses structural changes in the ad industry and a rapidly changing media landscape with the growth of Amazon.com Inc., Facebook Inc., Alphabet Inc.’s Google and other digital players.
“Increasingly we have different types of competitors, newer competitors,” Read said. “A lot of our clients are under pressure and looking to see how they can shift their marketing, and how we can be a more effective partner for them.”
Sorrell resigned from WPP after three decades on April 14 after a probe into alleged personal misconduct and misuse of company assets, his exit following a tough 12 months during which WPP lost about a third of its market value. He denied any wrongdoing and WPP concluded the probe without revealing any details.
When the results of the investigation were known, Sorrell decided to resign, Quarta told analysts. The company has no requirement to disclose the results and the matter surrounding personal misconduct “is really what we consider to be a matter of privacy, and therefore it’s a matter for Martin,” Quarta said.
WPP reported that sales fell 0.1 percent in the first quarter as declines in North America and Western Continental Europe offset gains in the U.K., Asia Pacific and Latin America. Those results excluded certain costs related to media buying and data collection and beat estimates for a decline of 0.9 percent, based on a WPP survey.
The quarterly results beat and the reports about the potential sale of Kantar could help WPP shares start to close a more than 30 percent underperformance year to date against the best performing agency group, Interpublic Group of Cos., said Ian Whittaker, an analyst at Liberum, in a note.
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