WPP Takes Control of Australia's STW

Following months of rumours, WPP has agreed to merge its Australian and New Zealand businesses with struggling Australia-based STW Communications Group Ltd, increasing its shareholding from 23.6% to 61.5%. STW's name will be changed 'to align it with WPP'.

STW owns all or part of 70 companies, and is WPP's partner in three ventures in the region, Ogilvy, Mindshare and JWT. The combined group - which will become the focus of WPP's business in ANZ - will number around 5,500 employees and have pro-forma LTM revenues of c.$AUD 1 billion, making it 'Australia's biggest marketing group' according to www.mumbrella.com.au .

Some form of merger / takeover has been on the cards for a while, with WPP increasing its holding in October. STW, founded in 1985, and listed on the ASX in 1994, has had a difficult year (or two), reporting a 'disappointing' first half in August (organic revenue down 4.2% and underlying net profit after tax down 22.5% to $15.1m), and announcing a 'Bruising' Restructure in June, including a new management structure and plans to merge a number of its businesses. WPP has been an investor in the company since 1998.

STW says there will be no job losses, although it predicts synergies of c.$15m a year following the merger.

The deal, which is subject to approval by STW shareholders and regulatory authorities, values STW at around $AUD512m and its shares at $AUD 0.915 each, representing a premium of 30% over prices prior to the announcement. WPP will also have the right to appoint a majority of Directors to the STW Board.

Michael Conaghan will remain CEO of STW and Robert Mactier Chairman. Mactier says of the deal: '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'.

The two groups already have partnerships in JWT, Mindshare, Maxus and Added Value and Connaghan (pictured) said the merger made 'great sense' and provided 'an amazing opportunity'.

WPP CEO Sir Martin Sorrell said in a statement: '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. 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'.

Web site: www.stwgroup.com.au .