Rumors about a possible WPP
merger with another holdco picked up steam over the weekend with The Times of London reporting that Havas “is understood to have held talks” internally
about acquiring some or all of the struggling London-based ad group.
The paper also reported that private equity firms Apollo
and KKR have done separate analyses of WPP assets. It wasn’t clear whether either firm was working with Havas.
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The Times also noted that those
developments come after a "nightmare" year for WPP's stock, which is poised to fall out of the FTSE 100.
"The company is currently valued at about £3 billion, down from a peak of
£24 billion in 2017," the Times wrote. "Hedge funds have taken an 8.5 per cent short position in its shares, showing that they expect a further fall, in part because an impending FTSE
100 demotion would see WPP lose out on investment from tracker funds that follow the index."
There’s been speculation about WPP being sold on and
off for years, including lots of chatter late last year when the Omnicom-IPG deal was announced, and the industry pondered who might be next. Omnicom and IPG say they expect to
complete their transaction by the end of this month.
In July there were press reports that WPP and Accenture may have held talks earlier in the year about a
potential pairing.
And reports earlier this month indicated that WPP has hired McKinsey to help it with an ongoing strategic review to help streamline
company operations and refine its go-to-market proposition.
On a call with analysts last month
Cindy Rose, the new CEO at WPP, discussed the strategic review that includes simplifying and integrating the firm’s offer to clients and improving execution among other
measures.
Strategic reviews are usually taken as meaning that a sale of the company is one possible
option, although Rose did not discuss that option on the analysts call. And it’s not clear if McKinsey’s remit includes helping to assess a possible M&A deal for WPP.
But WPP isn’t the only competitor Havas could possibly do a deal with—Dentsu confirmed in August that
it is pondering “strategic alternatives” for some or all of its international operations.
On its earnings call last month, Havas CFO
François Laroze said Havas “would certainly consider” talks with Dentsu over its international assets. He specifically ruled out buying the entire company.
And Havas
has some familiarity with Dentsu’s international ops—the core of which is the former UK-based media-focused agency firm Aegis Group.
Bollore Group,
which acquired control of Havas via a hostile takeover in 2005, owned 26.4% of Aegis. Dentsu bought that stake when it acquired Aegis Group in 2012.
Despite its current problems, WPP remains exponentially larger than Havas. But
with backing from Bollore a deal would be much more feasible.
This story has been updated.