WPP has taken its fight with longtime partner — Japanese ad agency ADK — to a new stage: the courts.
As predicted in this column last month, WPP has commenced legal action against the agency, which is trying its darnedest to get out of a decades-long ownership tie between the two companies, in a bid to go private via a $1.3 billion tender offer from Bain Capital.
WPP made its move in Japan on Tuesday, filing an arbitration application with the Japan Commercial Arbitration Association. The holding company has also lodged a petition for a preliminary injunction with the Tokyo District Court seeking a declaration that ADK’s attempt to terminate its alliance with WPP is invalid.
I may have been first to predict the brawl would end up in court, but FT.com was the first to report it, earlier today.
The companies have been partners for nearly 20 years. But tensions have been simmering for awhile, with ADK complaining that WPP’s involvement has prevented it from growing faster than it would have otherwise.
About a month ago, Bain launched its tender offer with the full blessing of ADK. WPP, with about a 25% stake in the agency, along with a growing number of other investors, has said the offer in underpriced.
Bain, in turn, has maintained that the offer is “full priced.”
ADK continues to maintain its right to terminate the WPP alliance is valid, after reviewing its agreement with WPP with a number of attorneys. "ADK has confidence that the termination right will stand," ADK has stated, and reconfirmed earlier this week. "ADK will require WPP to fulfill its contractual obligations to sell its shares in ADK.”
That confidence is shared by Bain Capital, which made the tender offer on the basis the WPP relationship could be unwound, believing that to be key to unlocking growth opportunities at ADK.
Obviously, WPP is hoping its legal move will spur other investors to join in the opposition against the tender as it currently stands. So far, investors representing an estimated 45% stake in the agency have publicly come out against the Bain offer.
Bain indicated earlier that it would cancel the offer if at least 50.1% of shares were not tendered. The tender offer is open until November 15, but Bain can extend it if it chooses to.
Ah — nothing like a gloves-off brawl between corporate titans over what matters most to them — money! Stay tuned.