Sir Martin Sorrell beats WPP in the race to buy MediaMonks - but is losing a £20 million payout in the process
- Sir Martin Sorrell quit as CEO of WPP in April amid an internal conduct investigation.
- He returned to the market six weeks later with S4 Capital, a vehicle for acquisitions.
- S4 Capital has struck its first deal: a €300 million takeover of Dutch digital agency MediaMonks.
- WPP was also looking at buying MediaMonks and says Sorrell used proprietary information from his time as CEO. The ad giant claims Sorrell has breached his contract and BI understands WPP intends to withhold future share bonus payouts.
LONDON - S4 Capital, the new vehicle set up by advertising deal maker Sir Martin Sorrell, has completed the takeover of Dutch digital agency MediaMonks.
Sorrell beat his former employer WPP to the deal but now faces the loss of WPP share awards worth up to £20 million that he had been entitled to.
Derriston Capital, which S4 Capital is in the process of merging with through a reverse takeover, announced on Tuesday that S4 Capital had acquired Mediamonks for an undisclosed fee. Business Insider understands the price is close to €300 million, with around a 50-50 split between cash and shares. A source close to the deal suggested the valuation was around 30 times historic earnings.
MediaMonks has revenues of approximately €110 million and employs 750 staff across 11 global offices, Derriston said. Customers include Adidas, Amazon, GE, Google, Johnson & Johnson, and Netflix. The agency won 18 gongs at last month's Cannes Lions, the Oscars of the advertising industry.
WPP had been looking at a possible deal for Mediamonks before Sorrell quite as CEO in April. WPP's lawyers Slaughter & May wrote to Sorrell's lawyers last week saying that they believed he was using proprietary information learned through his role as CEO of WPP and would be in breach of contract if he pursued the deal.
WPP's lawyers warned that Sorrell would lose his rights to share warrants under a "long-term incentive plan" agreed while he was CEO. The deal grants Sorrell a certain amount shares in WPP, based on the five-year price performance, in March each year up to 2021. The deal is worth up to £20 million.
A spokesperson for WPP told Business Insider: "WPP's lawyers wrote to Sir Martin's lawyers last week pointing out the breach of Sir Martin's confidentiality undertakings in his approach to Mediamonks after his resignation from WPP.
"Despite subsequent protestations from Sir Martin's lawyers, we are well aware of the facts and he has jeopardised his LTIP entitlement."
Business Insider understands that WPP intends not to award Sorrell the next bonus under the scheme, which is due March 2019.
Representatives for Sir Martin Sorrell were not immediately available for comment.
Sorrell resigned from WPP after 33 years amid an internal investigation into allegations of improper behavior and misuse of assets. Sorrell denied the accusations at the time but said the "current disruption" was "putting too much unnecessary pressure on the business." He returned to the market just six weeks later with his new vehicle, S4 Capital.
Derriston said in a statement that the MediaMonks acquisition "represents the first move by S4 Capital to create a new era, new media solution embracing data, content and technology, which meets client needs in an always-on environment."
Derriston will hold a shareholder meeting later this month asking permission to issue new shares to fund the acquisition of S4 Capital. Derriston, a small and little-known investment shell company that went public two years ago, is seeking to issue new shares worth up to £1 billion, giving it plenty of head room should Sorrell pursue further deals in the interim.