CEO departure may herald WPP breakup

london — Martin Sorrell’s abrupt exit from WPP leaves the advertising empire in search of a new CEO for the first time and vulnerable to a break-up, as the sprawling network of agencies faces its biggest challenges since the global financial crisis.

Sorrell’s departure late Saturday from the world’s largest ad company puts WPP’s omissions in grooming a successor to its 73-year-old founder into sharp focus, even with shareholders long flagging the issue. It also raises the prospect of a split, as WPP loses the man holding the empire together.

The shares fell as much as 6.6 per cent with WPP’s future strategy now unclear. Sorrell, who turned a 1985 investment in a wire shopping basket manufacturer into today’s behemoth of more than 200,000 employees, was long seen as irreplaceable — the man pulling the strings to connect its more than 400 agencies who create marketing campaigns for clients such as CocaCola and Procter & Gamble. Now, the group faces pitches from investment bankers pushing asset sales or a more dramatic dissolution.

The chances of significant chunks of the business being sold off have dramatically increased Ian Whittaker, Liberum analyst “The cataclysmic thing has happened,” Alex DeGroote, a media analyst at Cenkos Securities, said. “People are scared there’s another profit warning coming. They are in a negative tailspin.”

WPP’s data management unit Kantar, whose revenue growth has “consistently underperformed” the group average, is the most obvious candidate for disposal and could raise $5 billion to reduce debt or return cash to shareholders, Liberum analyst Ian Whittaker wrote in a note.

“The chances of significant chunks of the business being sold off have dramatically increased,” Whittaker said. “Sir Martin could arguably be called the glue that bound much of WPP together.”

Companies like Accenture, a consultant five times WPP’s market value at about $100 billion, have been seen as potential suitors for WPP units. —