WPP plc increases offer for WPP AUNZ

WPP AUNZ has said entering an arrangement as the next step of the proposed takeover by majority shareholder WPP plc is in the “best interests” of minority shareholders – 75% of whom will need to approve the deal for it to go through – after WPP plc upped its offer from 55 cents to 70 cents per share.

In a note to staff, CEO of the holding group’s local arm, Jens Monsees, addressed the takeover and announced the business’ FY20 and FY21 outlooks, also released to the ASX this morning. He said the takeover could be completed in the first half of next year, but noted the timing depends on a number of factors.

Monsees presenting at the WPP AGM earlier this year

“The Independent Board Committee, which is the committee set up to assess the proposal, has determined that it is in the best interests of WPP AUNZ minority shareholders to progress entering into an arrangement with WPP plc,” Monsees wrote.

“This is the first step and involves agreeing to hold a scheme meeting for shareholders to vote on the offer. The Independent Board Committee’s recommendation will be subject to the outcome of an independent expert report.”

Yesterday, WPP AUNZ entered a trading halt, connected to the takeover process. WPP plc already owns 61.5% of the company, and is attempting to acquire the remaining shares.

Aside from the offer price, all other terms of the proposal, which was first announced two weeks ago, remain unchanged. The revised offer gives WPP AUNZ an implied enterprise value of $717 million, according to documents filed with the ASX this morning.

The company’s undisturbed share price is 41 cents, with the share price closing at 57 cents on 15 December.

Monsees presents to the WPP team

At the same time the business lodged documents connected with the takeover to the ASX, it also filed a trading outlook statement for FY20 and FY21.

For the year ending 31 December 2020, WPP AUNZ predicted earnings before interest and tax (EBIT) of $59-62 million, earnings before interest, tax, depreciation, and amortisation (EBITDA) of $75-78 million, and net sales between $607 million and $610 million, a decline of around 15% year-on-year due to the impacts of the COVID-19 pandemic.

In its Q3 results released in October, the business posted EBIT of $24.6 million for the quarter thanks to cost savings, a $5.9m Jobkeeper lifeline, and better-than-anticipated performance from the group’s agencies. Net sales were down 14.3% year on year to $153.6 million, well ahead of the market’s drop of 27.1% for the period.

Following on from those results, October and November performed “in-line with internal expectations”, however December – the biggest revenue period – is still predicted to be down year-on-year.

Standard Media Index figures have plotted the pandemic’s impact on the market, with the worst result – a 40% drop – coming in May. Interim November figures, however, show the market marginally up after 26 consecutive months of decline.

Monsees told staff there is “good momentum in recent client engagements, as well as an improvement in the macro economic environment”.

The group also confirmed it is still on track to deliver $70 million in cost savings this year, $50 million of which are long term, or ‘sustainable’, savings.

“On an annualised basis, the sustainable cost measures are expected to provide a benefit of approximately $65 million in FY21,” the statement read.

Debt levels will sit at approximately $110 million as at 31 December this year, versus $128 million at the end of September.

“Our strategy is to transform, strengthen and grow our business over the coming few years. With much of the transformation phase of our strategy complete, 2021 is about strengthening and growing our business,” Monsees stressed.

“Next year will see the introduction of a number of initiatives to drive an increase in our revenue and profitability. These include improving client engagement, growing our top line and continued expansion in communications, tech, commerce and customer experience.”

As for FY21, WPP AUNZ anticipates EBIT of $85-95 million, EBITDA of $100-110 million, and net sales of $630-650 million. These predictions assume the economy will continue to recover from its pandemic battering, and “there are no new material COVID-related economic impacts and restrictions”.

Next year, the business is expecting to resume the payment of dividends, and anticipates declaring a dividend in its FY20 result in late February.

“2020 has been an extraordinary year; we are all now looking forward to a positive 2021 and bringing more creative and original ideas and advice to our clients,” Monsees added.


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