By Nick Kostov
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 11, 2018).
WPP PLC said Tuesday its former Chief Executive Martin Sorrell
has jeopardized his right to share awards worth around GBP20
million ($26.5 million), the latest salvo in a bitter breakup
between the advertising giant and its former leader.
WPP's contention against its 73-year-old founder came on the day
Mr. Sorrell announced a deal to buy Netherlands-based MediaMonks,
his first acquisition since leaving WPP in April. WPP also sought
the Dutch digital production agency, showing Mr. Sorrell is shaping
up as a rival to his former firm.
"WPP's lawyers wrote to Sir Martin's lawyers last week pointing
out the breach of Sir Martin's confidentiality undertakings in his
approach to MediaMonks after his resignation from WPP," a WPP
spokesman said Tuesday. "Despite subsequent protestations from Sir
Martin's lawyers, we are well aware of the facts, and he has
jeopardized his LTIP [long-term incentive program]
entitlement."
Mr. Sorrell, who owns close to 2% of WPP, is due to receive the
next payment from his deferred bonus in March. A person close to
WPP said the ad giant plans to withhold the payment.
"Sir Martin strenuously denies any such allegation and is
confident that the facts will do the talking," a spokesman for Mr.
Sorrell said.
The dispute over MediaMonks shows how central Mr. Sorrell was to
WPP's sprawling ad empire, generating clientele and cutting deals
to expand the firm's reach. With Mr. Sorrell charging ahead with
new ventures, WPP is now competing with the very man who investors
long regarded as a guarantor of its success.
"Martin Sorrell is WPP's brand," said Brian Wieser, an analyst
with Pivotal Research.
Part of the reason MediaMonks chose Mr. Sorrell was because of
the executive's "experience and a business brain," MediaMonks
co-founder and Chief Operating Officer Wesley ter Haar said in an
interview.
In April, Mr. Sorrell resigned as chief executive of WPP after
The Wall Street Journal reported that the company's board was
looking into an allegation of improper personal behavior and
whether Mr. Sorrell had misused company assets. Mr. Sorrell
rejected the allegation "unreservedly" at that time.
Mr. Sorrell met with MediaMonks executives in mid-2017 when he
was chief executive of WPP, according to people close to WPP and to
Mr. Sorrell. MediaMonks subsequently shut down the conversation,
saying they were going to review their position and talk again to
potential suitors in about a year's time, said a person who is
close to Mr. Sorrell. A MediaMonks spokeswoman said she was "not
aware" of these discussions.
A period of "radio silence" ensued between Mr. Sorrell and
MediaMonks until he quit WPP, according to the person close to Mr.
Sorrell. A person close to WPP said the company disputes this,
saying Mr. Sorrell and MediaMonks executives exchanged a flurry of
emails after meeting in mid-2017.
In May, Mr. Sorrell announced plans to create a rival
advertising firm, which he called S4 Capital, raising the specter
that he planned to go head-to-head with the company he founded.
On July 3, WPP sent a letter to Mr. Sorrell, saying the
executive began exploring an acquisition of MediaMonks last
November, and that Mr. Sorrell had traveled to the Netherlands to
meet with the production company's executives, according to a
person familiar with the letter. As WPP's chief executive at the
time, Mr. Sorrell was also able to assess MediaMonks' business,
client base and future prospects, the letter said, according to the
person.
Mr. Sorrell's attempts to acquire MediaMonks "amount to an
unlawful diversion of a maturing business opportunity from WPP,"
the letter said, according to the person.
Mr. ter Haar said he wasn't aware of any meetings between Mr.
Sorrell and executives from the Dutch production company before he
left WPP.
Mr. ter Haar said he met Mr. Sorrell for the first time in
May.
Founded in 2001, the little-known Dutch company produces
videogames, films and websites for clients ranging from Adidas AG
and Netflix Inc. to Aphabet Inc.'s Google.
The production firm has forecast EUR20 million ($23.5 million)
in adjusted earnings before interest, tax, depreciation and
amortization this year, according to one person familiar with its
finances. In paying around EUR300 million, Mr. Sorrell has valued
the firm at a multiple of 15 times earnings in an industry where
companies usually sell for less than 10 times earnings, according
to industry executives.
Mr. ter Haar said the firm hired a broker to gauge interest from
potential bidders after a suitor reached out to MediaMonks in
January 2018. At that point MediaMonks set out to "find a partner
to really get MediaMonks to the next step."
Within weeks of Mr. Sorrell's resignation from WPP, brokers for
MediaMonks reached out to gauge Mr. Sorrell's interest in buying
the company.
Mr. ter Haar said he didn't seek or receive any assurances from
Mr. Sorrell about the circumstances around his resignation.
"It wasn't part of our discussions," Mr. ter Haar said. "We were
truly focused on the deal structure and the shared ambitions."
--Suzanne Vranica contributed to this article.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
July 11, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Wpp (LSE:WPP)
Historical Stock Chart
From Apr 2024 to May 2024
Wpp (LSE:WPP)
Historical Stock Chart
From May 2023 to May 2024