WPP’s sale of half the Finsbury PR empire would make me feel somewhat squeamish were I a shareholder.
The struggling ad giant sold 49% of the firm to management led by Roland Rudd, famed consigliere to FTSE 100 chairmen and CEOs, yesterday.
The deal was complex, seeing Finsbury merge with two partner firms. However, it’s not the complexity that’s troubling, but the lack of financial details.
The sale may not have been big enough for the Stock Exchange to force WPP to disclose the price, but Finsbury is a large and profitable business, run by a man who eats deals for breakfast. Shareholders deserve to know they got value for money.
Particularly given WPP’s track record.
When its new management team sold its stake in ad tech firm Globant a couple of years back, it was for $52 a share, equating to $300 million. Despite Covid’s impact on media shares, Globant is now $156, so WPP’s stake would have been worth $905 million.
That’s $600 million of WPP shareholder value gone up in smoke.
Here’s a possible reason for the lack of transparency on Finsbury.
If managers in other WPP divisions saw the details and took the view Rudd had got this business for a steal, at best they’d feel demoralised, at worst they’d want to buy themselves out, too.
Rudd and his team were talking delightedly about how they were relishing having equity in their newly independent firm.
So how does that make the rest of the WPP employees feel, stuck with shares in a troubled empire that have halved in two years?
Demotivated, I’d imagine.
And pushing their bosses to do what Rudd has done.
Some won’t have the bottle, or will feel their firms’ prospects aren’t as good as Finsbury’s.
But the best of the rest will now be looking to break away.
And now the precedent has been set, how can WPP refuse?