WPP announced today that its majority-owned subsidiary, Finsbury Glover Hering Corporation, and Sard Verbinnen & Co have agreed to merge into a new company that will act as a holding co. This transaction will create the world’s leading strategic communications firm advising clients in navigating critical opportunities and challenges.
The completion of the merger is conditional on the satisfaction or waiver of certain conditions, including the expiration or termination of the waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Transaction is expected to complete in Q4 2021 and the combined company will operate under a new name starting in 2022, to be announced in due course.
Mark Read, CEO of WPP, said: “The demand for Board-level strategic advice on a growing range of financial, reputational and social issues has never been greater. As the reputations of companies and their brands become ever more closely linked, our leadership in this area is a core part of our offer as we support our clients’ continued transformation. WPP is delighted to support the ambitions of the leadership teams of Finsbury Glover Hering and SVC in creating a powerhouse in strategic communications, with the expertise, scale and footprint to provide unparalleled service to global clients.”
The merged company will be a leader in all aspects of strategic communications, including government affairs, corporate reputation, crisis management, and transformation and change, as well as the leading force in financial communications worldwide, with strong experience and expertise in M&A, private equity, IPOs, SPAC transactions, shareholder activism and restructurings.
Sard,Rudd and Eskew, co chairmen, Geiser to become Global CEO in the newco
Senior professionals from Finsbury Glover Hering and SVC will lead the new company. SVC’s George Sard will join Finsbury Glover Hering’s Roland Rudd and Carter Eskew as Co-Chairmen. Alexander Geiser will serve as Global CEO, Ajay Junnakar will serve as Global CFO, Sydney Neuhaus will serve as Global COO and Andrew Cole as Deputy Global CEO.
Finsbury Glover Hering Co-Chairmen Roland Rudd and Carter Eskew said: “Our clients operate in an increasingly complex world with diverse stakeholder interests. To generate growth, open markets, shape policy and attract capital, companies need to seamlessly communicate to more audiences and across more markets than ever before. This merger brings together the most accomplished communications professionals, operating within a global firm that will have the expertise and experience to deliver reputation advisory services to address critical c-suite concerns.”
Around 1,000 professionals and 25 offices in four continents
The new firm will employ approximately 1,000 professionals operating from 25 offices in Asia, Europe, the Middle East and the United States, including its global headquarters in New York. Pro forma combined 2020 revenue was more than $330 million.
The new firm’s professionals have deep sector knowledge within rapidly growing industries such as Health, Food and Agriculture, and Renewable Energy, as well as expertise in Diversity, Equity, and Inclusion (DE&I), Environmental, Social and Governance (ESG), litigation and regulatory communications, and cybersecurity.
WPP to hold the 57.4% of the new company
Following completion of the Transaction, WPP will remain as the majority shareholder of the combined Finsbury Glover Hering-SVC group, holding 57.4% of the total issued share capital of the new holding company, with FGH Managers holding 25.9%.
The current directors of Finsbury Glover Hering, who are deemed to be related parties of WPP, will together own 9.5% of the newco.
WPP informs that no Finsbury Glover Hering Manager (including the directors) will realise the value of their shareholding at completion of the Transaction nor are they expected to do so ahead of an IPO or sale of the newco.
SVC Co-Founders George Sard and Paul Verbinnen added: “This is a combination of two successful, growing firms with strong track records, complementary leadership positions, deep entrepreneurial spirits, cultures of collaboration and integrity, and a heritage of delivering for our clients at their most high-pressure moments. Our success has been driven by our teams’ tireless commitment to supporting our clients and one another, and upholding high standards of excellence in all that we do. We are particularly excited that the combination will enable us to provide additional professional development opportunities and establish a new generation of employee owners in the combined company.”
The combined Finsbury Glover Hering-SVC group will have an equity value of $917 million, and SVC $303 million.
As of 31 December 2020, Finsbury Glover Hering had gross assets of $426.8m and profit before tax of $53.5m, and SVC had gross assets of $52.2m and profit before tax of $36.4m.
A put option for Golden Gate Capital and the SVC Managers
The terms of the Transaction also provide for Golden Gate Capital and the SVC Managers to have the option to require that WPP purchases their shares in Newco in the event that an IPO or sale of Newco has not taken place by 1 January 2024 or later (the “Put Option”). The Put Option is exercisable on a staged basis over a minimum period of 4 years from 2024 to 2028 at the earliest and is at multiples of profit that are at a material discount to the Transaction multiple. Existing put options, based on comparable terms, held by the Finsbury Glover Hering Managers will be rolled over into the new structure.
The Transaction is a Smaller Related Party Transaction under the UK Listing Rules as certain Finsbury Glover Hering Managers are directors of Finsbury Glover Hering and some of its subsidiaries and therefore are related parties of WPP. As such, the Transaction is subject to the requirements of the Listing Rule 11.1.10R.
How the transaction will be baked
WPP will convert its existing loan note in Finsbury Glover Hering into shares in Finsbury Glover Hering, and all shares in Finsbury Glover Hering held by WPP and by employee shareholders (the “Finsbury Glover Hering Managers”) will then be exchanged for new shares in Newco. WPP will subscribe in cash for further new shares in Newco for $150m. Newco will then acquire SVC from Golden Gate Capital and SVC employee shareholders (the “SVC Managers”) in consideration for the $150m in cash (net of customary adjustments) and the issue of new shares in Newco, representing 16.6% of the total issued share capital of the newco.