Shares in the British advertising behemoth WPP experienced a significant surge on Monday, climbing as much as 6% and making it the top performer on the FTSE index. This sharp increase follows a report in the Sunday Times suggesting the company could become a takeover target.
Potential Suitors Circle the Struggling Giant
According to the report, WPP's French rival, Havas, has held internal discussions about a potential bid. Havas, which is controlled by the billionaire Vincent Bolloré and was listed on Euronext in Amsterdam in December, is the smallest of the global advertising holding companies and has historically sought to build scale. The speculation arrives as WPP’s share price languishes at levels not seen since the mid-1990s, valuing the entire company at approximately £3 billion.
The report also indicated that private equity giants Apollo and KKR had held their own internal talks concerning certain WPP assets. However, Apollo has since ruled out making a bid for the entire company. KKR, which acquired WPP's PR operation, FGS Global, last year, declined to comment on the recent speculation.
What's Behind WPP's Dramatic Decline?
WPP's current vulnerability stems from a period of significant challenges. The company has issued a string of profit warnings amid a client exodus and is widely seen as struggling to compete with the advanced AI and data capabilities of its rivals. This has led to a staggering fall in its market capitalisation, which has dropped by more than 80% over the past eight years from a valuation of £25 billion in 2017.
This precipitous decline has put WPP at risk of falling out of the FTSE 100 index, a position it has held for nearly three decades. Last month, the newly installed chief executive, Cindy Rose, launched a comprehensive review of the business after reporting a fresh profit warning.
Consolidation Wave Sweeps the Advertising Industry
The speculation surrounding WPP's future comes as a major wave of consolidation reshapes the global advertising market. In a landmark move, the US group Omnicom is in the process of closing a $13.5bn takeover of its rival IPG, a deal that will create the world's largest advertising holding company. Meanwhile, Dentsu, the world's fifth-largest ad group, is exploring a sale of all its international businesses.
Analysts point to WPP Media as the group's most valuable asset. This division, which manages more than $60bn (£46bn) in global media investment, is considered to be worth more than the entire approximate £7.5bn enterprise value of WPP, which includes its debt. This highlights the significant value locked within the struggling conglomerate.
While Havas has declined to comment, one source suggested the company could pursue a strategy similar to its past approach with the UK media firm Aegis, by building a stake in WPP before demanding a board seat. Any move by a major rival like France's Publicis Groupe, which recently took WPP's crown as the biggest ad group by revenue, would face considerable regulatory hurdles.
