Analysts are cautious about whether WPP will be broken up, now that Sorrell is gone. Citi analysts Thomas Singlehurst and Catherine O’Neill reckon the main question is whether a new WPP chief executive goes for a “quick fix” or sticks with the existing “slow fix”.
In the last year, WPP has been seen by many to be losing its way. Against the backdrop of an improving macro environment, organic growth has been slowing. In practice this slowdown has been happening for years and has a multitude of explanatory factors. Anyone coming in to take over the CEO role at WPP will be entirely focused on turning this round. The debate is now whether a new CEO goes for a Quick Fix vs. (the existing) Slow Fix.
Paul Richards, media analyst at Numis, says Sorrell will be hard to replace with one person.
The succession has led to questions over the size and scope of WPP and we can see a change of management accelerating the current process of reducing overlap and increasing flexibility.
Richards views Sorrell’s resignation as “tragic end to a remarkable career which saw the creation of WPP as a global leader in marcoms [marketing communications]”.
WPP has bought other holding companies (Y&R, Grey, Cordiant) as well as agencies and accordingly has grown to employ over 200,000 people in 400 businesses across 3,000 offices in 112 countries. In response to industry pressures including clients in-sourcing activity, pressure on CPG and structural challenges from the duopoly of Facebook & Google, WPP was already working to simplify its business and increase flexibility.
We expect a new CEO to continue and accelerate this process and a strategic review could lead to the group slimming its operations by a quarter to a third in our view.
WPP is due to report first-quarter results on 30 April.
Sorrell is free to start a new advertising venture because he has never had a non-compete agreement, the Financial Times reports.
In a farewell note to staff, Sir Martin underscored the role WPP had played in his career, saying the company was “not just a matter of life or death, it was, is and will be more important than that”. He also hinted at his next step when he signed off saying: “Back to the future.”
WPP shares dropped as much as 5% in early trading and are now down 1.7% at £11.67, with investors worried that Sorrell’s departure leaves the world’s biggest advertising group rudderless at a time when it might be broken up.
European stock markets have opened higher, apart from the London stock market which has slipped slightly.
- UK’s FTSE 100 index down 0.12%
- Germany’s Dax up 0.27%
- France’s CAC flat
- Italy’s FTSE MiB up 0.13%
- Spain’s Ibex up 0.08%
Shares in Whitbread have surged nearly 8%, replacing Shire as the top riser on the FTSE 100 index in early trading. Whitbread is under mounting pressure from hedge funds to break up its business by spinning off the Costa Coffee chain, after activist investor Elliott Advisors built up a stake of more than 6%.
Shares in Shire have opened 2.6% on the news, making it the biggest riser on the FTSE 100.
Shares in WPP have dropped 5% after the departure of chief executive Sir Martin Sorrell.
Shire sells oncology unit for $2.4bn
London-listed drugmaker Shire, which specialises in rare diseases, is selling its oncology business to French drugmaker Servier for $2.4bn. The division generated revenues of $262m last year.
Shire, which is a potential bid target for Japan’s biggest drugmaker Takeda, said it would consider returning the proceeds of the sale to shareholders through a share buyback.
Shire’s chief executive Flemming Ornskov hailed the sale as a key milestone for the company.
While the oncology business has delivered high growth and profitability, we have concluded that it is not core to Shire’s longer-term strategy. We will continue to evaluate our portfolio for opportunities to unlock further value and sharpen our focus on rare disease leadership with selective disposals of non-strategic assets.
The proceeds from the transaction increase optionality and Shire’s Board will consider returning the proceeds of the sale to shareholders through a shareholder-approved share buyback after the current offer period regarding Takeda’s possible offer for Shire concludes.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Following another week of gains last week, with Germany’s Dax and the UK’s FTSE 100 index hitting six-week highs on Friday, European stock markets are set to open higher today. US stock futures are also up, pointing to a higher open on Wall Street later.
Asian markets were mixed. The Nikkei in Tokyo closed 0.26% higher while Hong Kong’s Hang Seng was 1.7% lower.
There is relief that western missile strikes on Syria on Friday did not prompt a response from Russia, Syria’s main ally, although traders will be watching cautiously for any signs of escalation of the conflict.
Oil prices are slipping, with Brent crude in London down 1% to $71.83 a barrel while US crude is 0.9% lower at $66.79 a barrel.
Michael Hewson, chief market analyst at CMC Markets UK, says:
One of the main concerns last week was around the extent of the response by the US backed coalition on president Assad of Syria’s forces and any Russian reaction to it. The firing of over 100 cruise missiles over the weekend on various targets, with little in the way of casualties, appears to be tempered with relief that while it may reduce the risk of an escalation in the short term, it in no way means that we might not get a counter response further down the line. As such markets here in Europe look set to open cautiously higher this morning after shares traded slightly firmer in Asia.
The US also appears to be complementing its military approach by focusing on the additional sanctions route, after UN ambassador Nikki Haley announced that further sanctions were being discussed on Russian companies who have dealings with Assad and the use of chemical weapons, with details likely to be announced by US Treasury Secretary Steve Mnuchin later today.
Geopolitical developments and corporate earnings remain the main focus, in the absence of major economic news apart from US retail sales data for March, out at 13:30 BST.
In the UK, we will get the latest labour market stats tomorrow, followed by inflation on Wednesday and retail sales on Thursday, but today the calendar is barren. The International Monetary Fund holds its spring meetings of central bankers and finance ministers in Washington this week.
WPP boss Sir Martin Sorrell is leaving the advertising group he founded more than three decades ago ahead of the findings of an investigation into alleged personal misconduct. He is in line for almost £20m in payouts. His departure is seen as paving the way for a breakup of WPP.
Here’s a round-up of today’s front pages.