Print Published 12th Oct 2017, 12:43

WPP and ADK in open conflict: ADK’s management slated

The extent of the breakdown in the relationship between WPP and the Japanese marketing group Asatsu-DK (ADK) has been revealed in a series of public announcements this week, culminating in WPP claiming that ADK’s management has consistently resisted opportunities to improve the performance of its overseas operations and the exploration of significant digital opportunities.

Instead, WPP claims, ADK has preferred to “invest in disastrous acquisitions and consolidations such as Gonzo and Bungeisha, the costs of which have not been fully exposed, along with the disposal of Digital Advertising Consortium (DAC) in 2011 at a lower price than WPP’s indication and the reduction of ADK’s stake in Video Research Interactive”.

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ADK’s president Shinichi Ueno

Prior to the disposal of its DAC investment, ADK was a minority shareholder alongside Hakuhodo.  Then the investing parties decided that they would prefer to pursue their digital ambitions independently (see WPP takes stake in Hakuhodo dominated digital sales outfit).  ADK began to look for a buyer for its DAC stake and WPP offered to buy it for a little over ¥4.7 billion.

WPP told Marketing Services Financial Intelligence that ADK turned down its offer and instead accepted a lower amount of ¥3.95 billion (comprising a partial buyback by DAC with the balance of the shares sold on the market).  The price difference was the equivalent of £6.4 million. Since then the value of DAC’s shares has increased almost eight-fold.

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WPP’s Sir Martin Sorrell

Also revealed this week was further background to the appointment of Bain Capital to advise ADK. “They were the only candidate that made a specific proposal which contributes to improving the company’s corporate value”, ADK said.  “In addition the company decided that it shares the same vision with Bain Capital concerning the company’s intended direction of growth, and that Bain Capital would be the best partner to promote management reforms to achieve sustainable growth.”

Understandably, the precise direction of growth remains undisclosed, but Bain has clearly argued for an acquisitive route that would almost certainly lead to conflict if WPP remained a strategic partner (see Asatsu-DK takes tighter control of its global ambitions.

Yesterday WPP also reiterated its view that the proposed Bain deal undervalued ADK “significantly” and that ADK had “improperly attempted to terminate its co-operation and business alliance agreement with WPP, which it knows full well that it cannot do, as on previous occasions it had abided with this instruction” (see WPP questions validity of ADK termination notice).