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WPPGY on an Acq. Spree

by Zacks Equity Research

July 09, 2012 | Comments : 0 Recommended this article: (0)

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Last week, advertising titan WPP Group Plc. ( WPPGY - Analyst Report ) carried out twin acquisitions via its wholly owned companies, Kantar and Ogilvy & Mather. While the former is engaged in the information, insight and consultancy services of WPPGY, the latter is the global marketing communications group of WPPGY.

Kantar agreed to acquire about 87% stake in France-based, Press Index S.A. for EUR 6.81 per share. Press Index was founded in 1997 and generated EUR 17.5 million in revenue and held gross assets of roughly EUR 12 million as on 31 December 2011. Kantar intends to acquire the remaining 13% shares of Press Index, once it completes the current stake acquisition.

Ogilvy & Mather acquired a 70% stake in Brazil-based leading digital agency, Foster Informatica, Ltda for an undisclosed amount. The acquisition enables WPPGY to leverage benefits from Foster’s solid client base including Monsanto, Bayer, Metro, Danone and Goodyear.

Foster was founded in 1993 and generated roughly R$5.0 million in revenues as on 31 December 2011. Gross assets were approximately R$4.1 million.

WPPGY’s acquisitions and investments are all aimed at expanding the company’s operations in fast growing emerging markets, thus 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 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 ) .

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.

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