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WPP accuses ADK of improperly attempting to terminate alliance

The holding company resists Bain Capital’s tender offer to buy majority stake in ADK against a $1.3bn

British media group WPP has strongly resisted Japan’s third-biggest advertising agency ADK’s bid to walk out of 19-year old partnership as the later has supported the Bain Capital’s tender to buy a minimum of 50.1% shares against a $1.3bn tender offer.

Earlier this month, Bain Capital, the Boston-based private equity firm, had launched a tender offer to buy majority stake in Japanese agency that is scheduled to expire on Wednesday, November 15, 2017.

Accusing ADK of “improperly attempting to terminate” its co-operation and business alliance agreement, WPP stated that ADK knows full well that it cannot do, as on previous occasions it had abided with this instruction.

Following the clarifications by the Japanese agency in its FAQ released yesterday, WPP reiterated that the Tender Offer significantly undervalues ADK, as other shareholders have subsequently stated both publicly and privately. 

In a press statement, WPP asked if the Board ever considered or discussed any alternative bona fide offers or proposals for the company which may be of greater benefit to the stakeholders in the business including its clients and its people or has the only consideration been management’s concern about their own position in the future. “Has Bain Capital ever given ADK’s management reassurance about their own position as part of this transaction and, if so, should not those terms be disclosed?” WPP pointed out. 

While supporting the Bain’s offer, ADK had earlier stated, “Privatization of the business will result in a financial and strategic partnership with Bain Capital, and in the dissolution of ADK’s partnership with WPP Group, established in 1998. This alliance yielded positive results in the early years, primarily helping to enhance corporate governance as well as effective financial resources management, but has since played less of a strategic role in the company’s ongoing development, and has not materially contributed to the profits of the business.”

Responding to this, WPP said, “ADK’s management have consistently resisted opportunities to improve the performance of its overseas operations and exploration of significant digital opportunities, preferring 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 DAC in 2011 at a lower price than WPP’s indication and the reduction of ADK’s stake in Video Research Interactive.” 

In response to ADK’s support to the offer, the WPP Group claimed that the Japanese agency does not have the right to unilaterally terminate the Co-operation and Alliance Agreement (CAA) dated August 3, 1998 and entered into between both the companies and denied the validity of the ADK’s termination notice.

However, ADK stated in its FAQ, “The CAA provides that either party may terminate the CAA at any time by giving not less than 12 months written notice. The Company gave notice on October 2, 2017 in accordance with that provision, seeking to terminate the CAA. We believe that the CAA will subsequently terminate 12 months after the termination notice in accordance with the provision in the CAA.  Accordingly, the Company understands that a valid termination notice was given in accordance with the CAA.”

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Tags: WPP ADK
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