Advertising giant WPP agrees to sell Japanese partner to Bain Capital in £1bn deal

Lucy White
Sir Martin Sorrell is chief executive of WPP (Source: Getty)

Sir Martin Sorrell's advertising group WPP has agreed to sell its shares in Asatsu-DK (ADK), its Japanese partner, to private equity giant Bain Capital.

WPP – which owns just under 25 per cent of ADK – has also indicated that if the deal goes ahead, it will withdraw the legal action it brought against the Tokyo-listed company at the beginning of this month.

The injunction and arbitration proceedings were prompted by ADK's announcement, after Bain's initial approach in October, that it would endorse the offer and which valued it at more than £1bn and terminate its 20-year long partnership with WPP.

Read more: Advertising giant WPP hits back at Bain's offer to buy its former Japanese partner ADK

“We are very pleased that WPP has shown its support for the privatisation of ADK, and an orderly termination of the current alliance which exists between ADK and WPP upon the success of our offer,” said Bain's managing director David Gross-Loh.

ADK's other shareholders now have until 6 December to offer their shares to Bain, at the offer price of ¥3,660 (£24.56) apiece. Bain must gain at least 50.1 per cent of shares to complete the deal, but must win more than two-thirds of the shares in order to squeeze out any remaining shareholders and take the company private.

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A huge U-turn

Today's step back from legal action on WPP's part, and the news that it has agreed to sell its stake to Bain, is a significant about-turn for the FTSE 100 company. It had initially been sceptical of Bain's offer, saying it “significantly undervalued” ADK.

“Have the board ever considered or discussed any alternative bona fide offers or proposals for the company which may be of greater benefit to the stakeholders?” said a WPP spokesperson in a statement in October. “Or has the only consideration been management’s concern about their own position in the future?”

However, the updated offer from Bain has opened the doors to allow WPP to remain a shareholder in ADK – an opportunity which was previously not on the table, City A.M. understands. The agreed offer stated that Bain and WPP would discuss "in good faith" a potential minority investment from WPP, should Bain be able to privatise ADK.

Other shareholders in ADK, including London-based fund manager Silchester International Investors and Hong Kong's activist hedge fund Oasis Management, have also previously expressed displeasure at Bain's offer. Neither immediately responded to a request for comment.

ADK's share price had jumped 4.74 per cent at the time of writing, as investors bet on the offer's chance of success. WPP's had lifted incrementally by 0.08 per cent.

Read more: WPP cuts forecasts as advertising spending dwindles

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