Speculation WPP is eyeing takeover of STW Communications after increasing stake

stw logoThe world’s biggest advertising group WPP has increased its stake in Australian-based marketing holding group STW Communications, sparking speculation of a potential takeover.

In December WPP subsidiary Cavendish Square Holdings, STW’s biggest shareholder, increased its stake in the company to 22.4 per cent, despite the stock losing 40 per cent of its value in 2014.

Trading website The Motley Fool has put STW on its “list of potential takeover targets of 2015” alongside Network Ten, as the share price for STW it a three year low of 89c on Friday. As of midday it is trading at 89.5c, giving the company a market capitalisation of $364m.

Earlier this month STW denied to Mumbrella industry rumour that its media agency Ikon is using the back end functions of WPP’s GroupM trading group as part of its operations.

The Motley Fool describes the STW stock as “one of the worst performers on the ASX” in the last year, blaming two profit downgrades on the share price drop. The group, which holds assets including Ikon Communications and Ogilvy, is expected to announce its full year results in February.

Whilst WPP has been a long-time shareholder in STW the site claims the “depressed value and loss of management credibility” as well as “weak outlook for the Australian dollar” will make it “easier for such a transaction to be earnings accretive to WPP”.

WPP, controlled by Sir Martin Sorrell, has a market capitalisation of around $33bn.

STW declined to comment on “rumour and speculation”.

Alex Hayes


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