£8bn WPP FIRE SALE
Ad giant’s top clients at risk Key assets go up for grabs Crisis talks held today
WPP could be broken up in an £8bn sell-off as it battles to keep hold of top clients including Ford, Mars and HSBC following the shock resignation of Sir Martin Sorrell.
As directors cancelled a dinner planned for last night to focus on crisis talks today, speculation mounted that the sprawling empire that Sorrell created would be dismantled by his successor.
Analysts said they expected to see WPP’s market research and PR operations sold for more than £5bn while a further £3bn could be raised offloading investments in other companies.
Today’s board meeting was supposed to follow a dinner last night at Annabel’s, an opulent members-only club in Mayfair, where the menu would have included caviar and wild sea bass.
But the event, organised by 73-yearold Sorrell before he quit following a probe into alleged personal misconduct, was cancelled as crisis engulfed the company and the board kicked off a search for his successor.
‘It was not something the chairman had arranged, but something the chief executive had arranged, and he’s not here any more,’ said a source close to the board.
Bookmakers last night installed insiders Mark Read, 51, and Andrew Scott, 49, as favourites to succeed Sorrell. They were promoted to joint chief operating officers at the advertising giant following Sorrell’s weekend departure.
Others in the frame are thought to include Sky chief executive Jeremy Darroch and Andrew Robertson, boss of rival ad agency BBDO. Amid talk of a break-up of WPP, Goldman Sachs warned that the next boss also faced a battle to hold on to top clients.
Goldman analyst Lisa Yang said: ‘We see a potential risk of disruption to WPP’s operations in the near term given Sorrell’s close involvement in the business for the past 33 years, especially at a critical time when WPP is renegotiating with its largest client Ford and defending a number of accounts including Mars, Jaguar, HSBC, Shell, etc.’
WPP shares fell 6.5pc yesterday, taking losses since March last year to 42pc. The departure of Sorrell after 33 years at the helm of WPP brought the curtain down on the career of one of the biggest beasts in British business. Sorrell was for a long time seen as irreplaceable, having transformed WPP from a wire basket maker into a global advertising giant with more than 400 agencies and 200,000 staff.
But speculation is mounting that a new boss will sanction the break-up of the firm.
Industry experts said as much as £3.5bn could be raised through the sale of the market research business, which includes Kantar.
A further £1.8bn could come from the sale of its PR and lobbying operations.
And Alex DeGroote, an analyst at Cenkos, said WPP owned large stakes in companies such as Vice Media, Chime Communications and App Nexus that could fetch £3bn. Citi said the new boss faces two choices to start growth, a ‘slow fix’ that involved sticking to the current strategy or a ‘quick fix’ involving the break-up.
‘Asset disposals are an easy way for an incoming chief executive to differentiate themselves from the previous regime,’ said Citi analyst Thomas Singlehurst. ‘We can see the market being quite enamoured of this approach.’
Ian Whittaker, an analyst at Liberum, said: ‘We think there is a significant possibility that WPP will sell its market research unit and possibly PR but that the rest of the group will be kept.’
Veteran City commentator David Buik, an analyst at trading firm Core Spreads, said the humbling of Sorrell was ‘very sad after such a brilliant career’.
And with pressure mounting on WPP to publish the full details of the investigation, former business secretary Sir Vince Cable accused the company of sweeping the claims ‘under the carpet’.