WPP boss Sir Martin Sorrell says new STW/WPP entity will be $1bn business, but not with Asia

WPP CEO Sir Martin Sorrell

WPP CEO Sir Martin Sorrell

Sir Martin Sorrell has said STW Group needs to refocus its business on its Australian and New Zealand operations and not on an Asian expansion following his company WPP taking a 61 per cent controlling stake in the holding group today.

While CEO Michael Connaghan said the newly merged company would still operate in Asia, Sorrell told Mumbrella today the company needed to make the most of its mature businesses locally.

“This will be a billion dollar business in Australia and New Zealand,” said Sorrell, the CEO of WPP, the world’s largest marketing services holding company.

After years of speculation STW Group announced the details of the merger, which sees WPP take a 61 per cent stake in the listed Australian company, this morning after Mumbrella broke the story of the merger forcing STW to suspend share trading on the ASX on Friday. The company confirmed it was a share swap and would not be billed as a takeover.

Sorrell said he had made his views clear on STW’s push into Asia, which had been part of STW’s recovery plans after a “disappointing” year.

“It was best to focus on Australia and New Zealand,” he said.

“We have a string business in Australia and New Zealand as you know, and given the strategic focus … that STW has on Australia and NZ as it’s obviously very difficult to build, as I have said before, a business from scratch in Asia Pacific given the competitive situation and given what others, including ourselves, have been doing.

“So it’s a good time and strategically strong to bring together our business internationally and particularly Asia Pacific and combine our strong assets in Australia and New Zealand.

“The timing is right. I think STW embarked upon an extra-Australia and New Zealand expansion. It didn’t go brilliantly and this is the right time to do it.”

The combined assets of STW and WPP

The combined assets of STW and WPP

One of the market criticisms of STW since its days as John Singleton Advertising was the reliance on acquisition for growth, and Sorrell said part of the way forward for the business was to make sure organic growth was at the heart of the strategy.

“As I said a number of years ago in realtion to the Asia Pacific focus, you do far better if you focus on organic growth. It’s more proftitable, its stronger.”

He said the timing was also good from WPP’s perspective with both the Australian and New Zealand economies under pressure.

Under the terms of the deal WPP has pledged to hold its stake in STW at 61 per cent.

“It will be a relatively de-leveraged group and it will be in a strong financial position. It’s good that we are doing it on a swap of equity and given the size of our business in Australia and New Zealand that’s the way it works out combined with our original 23 per cent. Given the scale of the business it’s a very good combination.”

Sorrell also reflected on his first interactions with STW when John Singleton was still the company’s major shareholder.

“Given where it started it has been strong. John is an iconoclast, he is a larrikin of the first order and Russell (Tate) was an extremely good counterfoil to John and both were very talented and they drove the business very well,” he said.

“I think now what you are seeing is the fruits of all that, given where started it has done well and it will be the strongest force in the market.”

Simon Canning


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