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Martin Sorrell

WPP agrees to sell ADK shares to Bain Capital

After a months and a war of words, WPP has agreed to sell its shares in Asatsu-DK (ADK) to Bain Capital Private Equity. The former has also agreed to tender its shares to Bain Capital at JP¥3,660 per share, the initial amount that was proposed by Bain Capital in October this year.

The completion of the transaction is subject to a minimum of at least 20,785,200 (50.1%) of the company’s common shares being tendered. Currently, the network holds 10,331,100 ADK shares, representing 24.96% of the issued share capital of the Japanese creative agency.

In a press statement confirming the move to Marketing, Bain Capital revealed that WPP has also indicated that if the tender offer succeeds and concludes, it will also withdraw the arbitration and injunction proceedings brought against ADK on 1 November 2017. This will result in the alliance between WPP and ADK being terminated with immediate effect.

Meanwhile, in the event Bain Capital is able to take ADK private, it will discuss with WPP a potential investment by the latter as a non-controlling minority shareholder in a Bain Capital investment vehicle that directly or indirectly owns the interests of ADK.

“Any future cooperation will be discussed in good faith by both parties,” the statement added.

Following the move, Bain Capital has also filed an extension with the Kanto Local Finance Bureau. This gives shareholders of ADK until 6 December 2017 to participate in the offer. The extension is a requirement of the Financial Instruments and Exchange Act in the event that new information relating to an offer becomes available to shareholders.

The statement affirmed that the offer price of JP ¥3,660 per share represents fair value for shareholders. According to ADK’s disclosure, this is equivalent to a 29 to 55% premium over trading levels. It added that this places the purchase price at the highest range of ADK’s share price over the last decade. It also places the purchase price at a “significantly higher” trading multiples than larger publicly traded ad agencies.

“We are very pleased that WPP has shown its support for the privatisation of ADK, and an orderly termination of the current alliance which exists between ADK and WPP upon the success of our offer. We now hope ADK’s other shareholders will recognise the attractive valuation and liquidity opportunity presented in our fair and fully priced offer, and tender their shares,” David Gross-Loh, managing director at Bain Capital Private Equity, said.

Just last week, WPP rejected Bain Capital’s tender offer launched on 2 October 2017 as the network believes that Bain Capital has “significantly undervalued” ADK, its assets and future opportunities as stated previously.

According to the press statement, WPP was approached by shareowners and ADK management, to clarify its commitment to the agency, if the tender offer which was “supported by the ADK Board as the only future for their company”, fails.

WPP and ADK entered into a war of words last month, as ADK responded to statements maderegarding the tender offer Bain Capital made for ADK shares in early October. Countering undervaluation claims, ADK said that Bain Capital’s offer price was “heavily scrutinised”.

News of Bain Capital’s interest to acquire ADK from WPP broke in October 2017.

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