Shares in the global advertising giant WPP experienced a significant surge, climbing as much as 6% in a single day, following reports of potential takeover interest. The speculation has put the spotlight on the company's future as its market value languishes near multi-decade lows.
Who is interested in a WPP takeover?
According to a report from the Sunday Times, WPP's French rival, Havas, has held internal discussions about a potential bid. Havas, which is controlled by billionaire Vincent Bolloré and was recently listed on Euronext in Amsterdam, is understood to be exploring ways to build scale, particularly in media buying.
The report also suggested that major private equity firms Apollo and KKR have held internal talks regarding certain WPP assets. However, Apollo has since ruled out making a bid for the entire company, while KKR, which acquired WPP's PR operation FGS Global last year, declined to comment.
This is not the first time Bolloré has pursued a UK advertising firm. Over several years, he built a stake in Aegis and attempted to gain board seats, before the company was ultimately sold to Japan's Dentsu for £3.2 billion in 2012. Sources suggest a similar strategy of building a stake and demanding board representation could be employed with WPP.
What's behind WPP's vulnerability?
The speculation arrives at a challenging time for the world's former largest advertising group. WPP has issued a string of profit warnings and is grappling with a client exodus. The company is also struggling to compete with the advanced AI and data capabilities of its rivals.
These struggles are starkly reflected in its valuation. WPP is now valued at approximately £3 billion, a dramatic fall of more than 80% from its £25 billion market capitalisation in 2017. This precipitous decline places the company at risk of falling out of the FTSE 100 index, a listing it has held for nearly thirty years.
In response to these pressures, the newly installed chief executive, Cindy Rose, has launched a comprehensive review of the business after delivering a fresh profit warning last month.
Consolidation sweeps the advertising market
The uncertainty surrounding WPP's future comes amid a significant wave of consolidation within the global advertising industry. In a landmark deal, US group Omnicom is in the process of acquiring its rival IPG for $13.5 billion, a move that will create the world's largest advertising holding company.
Furthermore, Dentsu, the world's fifth-largest ad group, is reportedly exploring a sale of all its international businesses. This context makes WPP a potentially attractive target for entities looking to gain scale and market share.
Analysts point to WPP Media as the group's most valuable asset. The division, which manages over $60 billion (£46 billion) in global media investment for clients, is considered a revenue and profit driver. Some estimates suggest this single division could be worth more than WPP's entire current enterprise value of approximately £7.5 billion, which includes its debt.
While other major players like France's Publicis Groupe could be interested, any bid from them would likely face considerable regulatory hurdles. For now, the market watches and waits to see if the speculation will translate into a formal offer for the beleaguered advertising titan.
