The former WPP chief Sir Martin Sorrell is plotting to raise up to £1bn for a takeover spree that could ultimately re-establish him at the helm of a sizeable international marketing services empire.
Sky News can reveal that a shareholder circular posted on Wednesday to investors in Sir Martin’s new marketing services vehicle disclosed its ability to issue stock worth up to £1bn to fund acquisitions.
The size of the potential warchest is much greater than Derriston Capital – the cash shell that Sir Martin is acquiring – had previously indicated would be available to him.
Its disclosure comes as Sir Martin fights a €300m (£265m) bidding war with his former employer over what could become the first purchase by S4 Capital, his new venture: a Dutch-based digital creative agency called MediaMonks.
On Tuesday, Sky News revealed that WPP Group had tabled a rival bid for MediaMonks, pitching it into a headlong battle with Sir Martin less than three months after he quit the company amid acrimonious circumstances.News of their competing offers for MediaMonks comes less than a fortnight after Sir Martin told an audience at the Cannes Lions advertising festival that S4 would not be in direct competition with his former employer.
“I’ve referred to it being a peanut,” he said.
“Although it does occur to me that some people have peanut allergies.”
The size of Sir Martin’s potential takeover warchest will raise expectations that S4 Capital may ultimately be regarded as a competitor to WPP.
That poses potentially awkward questions for both parties, given the absence of a non-compete clause in his final WPP contract.
He has, nevertheless, given confidentiality undertakings which could impact on S4’s ability to strike certain deals.
In the circular ahead of a meeting later this month at which he will seek to take over Derriston and rename it S4, its board said it was “seeking shareholder approval to authorise the issue of up to 1bn consolidated ordinary shares…where the implied look-through issue price is not less than £1”.
Sir Martin would avoid his influence being diluted by a B-share structure which allows him total control of S4.
Market speculation has already linked S4 Capital to other targets including MDC Partners, a US-listed agency group, in recent weeks.
Sir Martin left WPP following an investigation into allegations relating to the use of company funds to pay for a sex worker – which he has vociferously denied.
His ability to establish a business in direct rivalry with WPP, the owner of J Walter Thompson, Ogilvy and Young & Rubicam, while retaining up to £19m in unvested share options led to a limited shareholder protest against the chairman, Roberto Quarta, at last month’s annual general meeting.
Sir Martin remains a significant shareholder in WPP, with much of his wealth tied up in the stock of the company he took from a manufacturer of shopping baskets in 1985 to bestriding the global advertising industry.
By the time he stepped down in April, WPP was valued by the stock market at more than £16bn.
Its shares have slipped in recent months, however, amid investor anxiety about the impact of marketing budget cuts and shifts at major global advertisers.
Ford has put its global creative business – held by WPP agencies – under review, while an executive at Unilever, WPP’s second-largest client, said it would watch S4 Capital’s progress with interest.
Sir Martin’s progress is being closely watched by the world’s biggest marketing services agencies, which are being forced to adapt to a fast-changing media landscape in which Facebook and Google have emerged as powerful challengers to traditional advertising media.
Sir Martin has committed £40m of his own money to the new venture, with institutional investors such as Lombard Odier, Miton, Schroders and Toscafund all backing the vehicle.
Dowgate Capital, a stockbroker, has been working with Sir Martin on fundraising activity by S4, which is structured so that it is controlled by its executive chairman with an iron grip.
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Roberto Quarta, the chairman, has named two long-serving WPP executives as joint chief operating officers while a permanent successor to Sir Martin is being recruited.
It has not made any big strategic moves since Sir Martin’s exit, although it has agreed to sell equity holdings in two technology businesses.