WPPGY to Acquire Alchemedia

Advertising titan, WPP Group Plc. ( WPPGY - Analyst Report ) through its media investment operation company, GroupM signed an agreement to acquire South-Korea based media planning and buying company, Alchemedia Inc. Financial terms of the transaction were not disclosed.

The acquisition will bolster GroupM’s presence in Korea through an easy access to Alchemedia’s solid client base. Together, the companies will have big names including Audi, GSK, Hicos Fragrances, IBM, LG Electronics, Lock & Lock, Procter & Gamble, Sejung Fashion, Red Bull, Rolex and VW, among others on their client list.

Alchemedia was founded in 2004 in Seoul. As of December 31, 2011, the company generated over KRW 1.4 billion in revenue and had KRW10.0 billion in gross assets.

WPPGY’s acquisitions and investments are all aimed at expanding the company’s operations in fast growing emerging markets and enabling access to vast untapped markets in those regions. In the fiscal year 2011, WPPGY made roughly 24 acquisitions in new markets, 32 in new media and 8 in consumer insight. The company’s acquisition of Alchemedia will thus enable WPPGY to expand its client base in South Korea, where media spend is predicted to increase 9.5% in 2012.

Also, lately, WPPGY’s wholly-owned subsidiary Grey Group Germany announced its plans to fully acquire Frey G2 as against a 50% stake in the latter. Post acquisition Frey G2 will be renamed Grey Shopper and will have Procter & Gamble, Coca-Cola and Pfizerin its client kitty.

The current Zacks Consensus EPS Estimates for WPP plc are $5.65 and $6.31 for the fiscal years 2012 and 2013, respectively. The estimates represent a year-over-year growth of 5.10% for 2012 and 11.52% for 2013.

This Dublin, Ireland-based advertising and communications services provider competes with other industry players including Interpublic Group of Companies Inc. ( IPG - Analyst Report ) , Omnicom Group Inc. ( OMC - Analyst Report ) and Publicis Groupe SA (PUBGY.PK).

We currently maintain a Neutral recommendation on WPPGY. The stock also bears a Zacks #3 Rank, implying a short-term (1-3 months) Hold rating.