STW has confirmed it has entered an agreement to merge with WPP, calling the takeover a “win-win” for all stakeholders.
The confirmation follows a trading halt of its shares on the ASX on Friday, “pending an announcement”, which was strongly rumoured to be a takeover by the UK-owned company.
Under the arrangement, WPP will own 61% of the merged group from a current 23.55% stake in STW by its subsidiary Cavendish Square Holding. It will see STW function as the primary vehicle for WPP in Australia and New Zealand.
Current CEO Michael Connaghan and CFO Lukas Aviani will continue to run the merged entity, along with chair Robert Mactier.
“Bringing together the respective iconic brands and wonderfully talented people of STW and WPP Australia and New Zealand under a single common ownership will unlock tremendous local and global capability, experience and efficiencies for our clients, as well as establishing a fantastic platform for our people to prosper,” Mactier said.
“I consider this a genuine win-win transaction for all our stakeholders. Post completion, we look forward to working seamlessly with WPP as our major shareholder and strategic partner as we embark on the exciting journey that is in front of us.”
The deal is also said to provide a wide range of synergies for the merged business including cost benefits of at least $15 million per annum, to be fully realised over three years.
It will also increase the scale of STW's operations, with the merged entity generating pro-forma normalised net sales of $847 million and normalised EBIT of $142 million for the 12 months ending 30 September.
WPP CEO Martin Sorrell said Australia and New Zealand is WPP's fifth largest market after the US, the UK, China and Germany.
“The merger of our Australian and New Zealand operations with STW will give us a unique opportunity to offer our local and international clients a comprehensive set of services, and to make sure we can offer the best talent through country management,” Sorrell said.
“It will also enable STW to focus on the Australian and New Zealand markets, which it knows best, with a structure that will strongly incentivise its people.”
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