Martin Sorrell to Acquire Digital Production Agency MediaMonks, Outbidding WPP
July 10 2018 - 2:16AM
Dow Jones News
By Nick Kostov
Martin Sorrell's new marketing venture has agreed to acquire a
Netherlands-based digital production agency, topping a rival bid
from the WPP PLC, the advertising giant he spent decades
building.
Financial terms weren't disclosed, but people familiar with the
matter said Mr. Sorrell's new venture, which he plans to call S4
Capital, will pay around EUR300 million ($352 million) for
MediaMonks in cash and shares.
Mr. Sorrell's pursuit of MediaMonks shows the 73-year-old
executive hasn't lost his appetite for acquisitions, especially if
that means dueling with his former employer over prize assets. In
1985, Mr. Sorrell took a shell company called Wire & Plastic
Products and used it to make a string of acquisitions, eventually
building the world's largest ad group with a market capitalization
of more than GBP15 billion ($19.9 billion).
In April, Mr. Sorrell resigned as chief executive of WPP after
The Wall Street Journal reported that the company's board was
looking into an allegation of improper personal behavior and
whether Mr. Sorrell had misused company assets. Mr. Sorrell
rejected the allegation "unreservedly" at that time.
The probe looked into whether Mr. Sorrell used company money to
pay for a prostitute, the Journal subsequently reported, citing
people familiar with that investigation.
Last month, Mr. Sorrell denied he visited a prostitute and paid
for it with company money. He has also more broadly denied any
wrongdoing.
A deal for MediaMonks marks Mr. Sorrell's first acquisition
since resigning from WPP, and his willingness to bid against the ad
giant is ratcheting up tensions between the two sides.
Founded in 2001, MediaMonks produces games, films and websites,
and its use of technologies like virtual reality has made it a
coveted business for advertising agencies whose clients are seeking
cutting edge technologies for their ads. It employs more than 750
people and has worked for companies including Adidas AG, Netflix
Inc. and health-product company Johnson & Johnson.
Last week, WPP's lawyers wrote to Mr. Sorrell's lawyers to warn
him that he was "likely to be in breach of his confidentiality
undertakings" over his pursuit of MediaMonks, according to a person
who has reviewed the letter. The letter stated that Mr. Sorrell
could lose share awards worth millions of pounds that were part of
his long-term incentive program with WPP, the person said.
The letter said WPP began exploring an acquisition of MediaMonks
last November, and that Mr. Sorrell had traveled to the Netherlands
to meet with the production company's executives, according to the
person. During that period, Mr. Sorrell was also able to assess
MediaMonks' business, client base and future prospects, the letter
said, according to the person.
"As a consequence [Mr. Sorrell] was privy to extensive WPP
confidential information which he was only able to acquire through
his role at WPP," the letter said, according to the person.
"It's a matter for the lawyers but Sir Martin strenuously denies
any breach of anything," said a spokesman for Mr. Sorrell.
Mr. Sorrell has described S4 Capital as a "peanut" that is too
small to compete with an ad giant like WPP.
Still, the acquisition is the first step in Mr. Sorrell's
mission to build a "new era" marketing group focused on data,
technology and content creation. He has been increasingly critical
of WPP in his public appearances, faulting its handling of events
leading up to his departure and calling its decision to unload a
minority stake in software company Globant a "significant
mistake".
WPP and other ad holding companies are trying to restore revenue
they have lost as some advertisers that once kept agencies on
lucrative retainers have begun to limit their spending to one-off
projects. By investing in production, ad agencies can diversify
their revenue streams in project-based work that still requires a
production studio for filming, mixing the soundtrack or coding a
videogame.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
July 10, 2018 03:01 ET (07:01 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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