Equity firm Bain Capital expresses interest in buying WPP ad agency ADK

Private equity firm Bain Capital has revealed plans to acquire Asatsu-DK Inc (ADK) from WPP; one if successful will lead to the privatisation and delisting of the agency from the Tokyo Stock Exchange (TSE). It will also lead to the dissolution of ADK’s partnership with WPP Group, which was established in 1998.

When contacted by Marketing, WPP declined to comment on the matter. However, according to Marketing sources close to the matter, WPP believes that the bid significantly undervalues the business. Marketing has reached out to ADK for additional comment.

According to a report by Financial Times (FT), ADK has been in talks with Bain for three years, having rejected previous acquisition offers from other companies.

The agency was looking to end its partnership with WPP in favour of entering partnerships in digital advertising.

In a statement issued to FT, an ADK explained that distinctions over mid and long term business strategies had appeared with WPP. This resulted in a circumstance saw difficulties in making “swift and flexible” decisions able to adapt to changing business landscapes.

According to a press statement on the tender offer, Bain Capital has offered to acquire the common shares of ADK at a price of ¥3,660 per share, which represents a premium 15.1% to the closing price of ¥3,180 on 29 September 2017. Completion of the transaction is subject to a minimum of 20,785,200 of ADK’s common shares being tendered, which represents about 50.1%. Meanwhile, the tender offer is scheduled to expire on 15 November 2017.

According to a press statement, the move is a result of a full strategic review of the business. The review concluded that privatisation “represents the best option for the company to position itself for sustainable future growth”. As such, privatisation of the business will result in a financial and strategic partnership with Bain Capital.

The partnership will enable ADK to have financial flexibility and strategic expertise it requires to invest in core areas of growth. This is particularly digital, content and its overseas business. According to the statement, this comes as ADK looks to move into its next phase of growth and transform the business into one that is digital first and promotes greater engagement with consumers.

According to Shinichi Ueno (pictured), president and group CEO of ADK, the new partnership will also allow ADK to set a course towards “bold structural reforms and growth strategies” which will allow it to enhance its competitiveness and expand its market share domestically and globally.

“This new partnership will open access to a broader network of strategic partners, enabling ADK to build on its success in markets across Asia and elsewhere in the world. We are confident that this transaction is in the best interests of all our stakeholders,” Ueno added.

The statement added that Bain Capital’s deep market knowledge, extensive local and global networks and expertise in driving operational improvement strategies have made it a valued partner for Japanese companies. Its alliance yielded positive results in the early years through enhancing corporate governance as well as effective financial resources management. However, it has since played less of a strategic role in ADK’s ongoing development, and has not materially contributed to the profits of the business.

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