The merger between STW Communications and the Australian arm of Martin Sorrell’s WPP has been formalized. On Monday, the STW shareholders overwhelmingly voted for the merger with the new business being rechristened as WPP AUNZ. It will remain listed on the Australian Securities Exchange.
STW Group Chairman Robert Mactier hoped the deal would future-proof the business. The merger, decided in December 2015, will see STW acquiring the WPP Group for an enterprise value of $512 million and absorbing its net debt of $125 million. STW chief executive Mike Connaghan will continue as the CEO of the merged entity.
The new board will consist of Connaghan, four independent directors and six WPP nominees. WPP Australia and New Zealand chairman Geoff Wild and its chairperson for Indonesia and Vietnam Ranjana Singh will also join the board.
The shares of STW were up 40 percent since the merger was announced. The merger will lead to STW function becoming the primary vehicle for WPP in Australia and New Zealand, reports The Sydney Morning Herald. Australia and New Zealand had been the latter’s fifth largest market after the US, the UK, China, and Germany.
Mactier thanked shareholders for their “overwhelming endorsement” of the deal. Replying to a shareholder’s question on the timing of the deal without waiting a stronger moment in the economy, Mactier replied: “This has been talked about and speculated over for at least 15 years … We feel the deal will now accelerate the opportunities [for STW] and future-proof the business.”
In the Extraordinary General Meeting that lasted just 30 minutes it was informed that almost 432 million shares in STW will be handed to WPP for creating the newly merged entity covering a wide range of communications agencies including Ogilvy, JWT, and GPY&R, reports Mumbrella.
According to analysts, the benefits include combined local knowledge and a slew of international partners, increased scale, and a diversified portfolio, reports Ad News.
Some of the disadvantages will be the dilution of shareholding and the reduced likelihood of the new group becoming a takeover target.