WPP agrees to Bain tender offer for Japan's ADK

According to a statement, WPP will sell its 24.9% holding in ADK to Bain for the offer price of JPY3,660, a total consideration of JPY37.8 billion ($337 million). The company also agreed to withdraw the request for arbitration and the injunction it filed against ADK in Japan, on the condition that the tender offer is completed. Bain has set the minimum level of acceptance for its offer at a 50.1% stake.

Prior to the announcement on November 21 ADK’s stock was trading around JPY3,520; in the mid-morning of November 22, the stock was trading at JPY3,650. ADK’s shareholders have until December 6 to accept the offer following an extension requested by Bain due to the dispute with WPP.

WPP has been against the offer since ADK and Bain announced it last month, saying that it significantly undervalued the Japanese company. The London-based media company later accused ADK of breaching their contract by entering a hedging agreement with Morgan Stanley preparatory to selling its 2.4% stake in WPP. ADK had already announced it would sell the WPP stake as part of the Bain deal, but WPP said their agreement prohibits any transfer or disposal of WPP shares by ADK.

The dispute also brought out longstanding disagreements between WPP and ADK, with WPP saying that ADK had failed to take advantage of numerous opportunities for improvement or to respond to WPP’s suggestions regarding the expansion of digital operations and restructuring of its money-losing overseas operations. WPP has agreed to end its business relationship with ADK following the offer.

ADK is Japan’s third-largest advertising agency by market share, with clients across multiple sectors. According to its most recent annual report, the company recorded revenue of JPY353 billion for the year ended December 2016, up from JPY352 billion in 2015. Over the same period, net profit fell from JPY5.6 billion to JPY2.6 billion.

Following the acquisition, Bain plans to delist ADK. The company is looking to make significant changes to its business model and sees privatization as the best way to provide needed financial and strategic flexibility.

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