By Joe Mayes
WPP rose the most in almost a decade yesterday as investors looked beyond its lack of growth and focused instead on possible asset sales after the departure of founder Martin Sorrell.
The world’s largest advertising company pledged that interim co-chief operating officers Mark Read and Andrew Scott would undertake a strategy review while delivering first-quarter financial results that beat analysts’ estimates.
Executives spent a subsequent meeting with analysts playing down expectations for a breakup after media reports over the weekend that it is considering the sale of its market research unit Kantar.
“We will be keeping an open mind and will always go where value is for shareholders,” executive chairman Roberto Quarta said at the analyst meeting in London. “The starting point is not a breakup,” he said.
WPP’s interim managers are signaling they’ll move quickly to position the business differently following Sorrell’s abrupt departure as chief executive this month, as the company looks for his replacement.
Analysts have speculated that the network of more than 400 agencies could be broken up or that the company could pursue more modest asset sales as it battles a decline in ad spending by key clients such as Unilever and Procter & Gamble and seeks to fend off new rivals.
The shares surged 8.6%, the most intraday rise since December 2008.
“The stock rise is entirely due to the fact that the breakup story is playing out, but even faster than we had anticipated,” said Alex DeGroote, an analyst at Cenkos Securities.
Over the weekend, The Times reported managers of WPP’s market research group Kantar are considering a management buyout of the unit.
The business has also attracted preliminary interest from private equity firm CVC Capital Partners, according to a source, confirming a Financial Times report.
Read said while it’s too early to speculate on specific asset sales, WPP could consider parting with minority stakes in businesses.
Under Sorrell, WPP bought minority stakes in an array of digital, media and marketing companies, including a 15% holding in ad-tech firm AppNexus and a slice of global youth media outlet Vice Media.
“We’re taking a fresh look at strategy. The focus is on how we can get growth,” said Read.