VML & ghg Float New Company - Analyst Blog

Two companies of  WPP Group Plc (WPPGY), ghg and VML announced the formation of Healix Digital Health, a new company focused on digital healthcare. VML is a global digital marketing unit of WPP Group, while ghg is engaged in global healthcare communications.

The newly formed company, which is to be led by officials from both ghg and VML, will be headquartered in New York City. The combined effect of healthcare marketing and communications expertise of ghg and digital marketing experience of VML will bode well for Healix Digital Health. It is also worth mentioning that such a mix will ensure better services to their pharma and healthcare clients.

We believe WPP Group lays a lot of emphasis on new markets, new media and consumer insights. The company has a dominant market share in many areas and has the pricing power to improve margins and sustain future profit growth. Also, revival in the global economy has improved advertising spending by companies across the world.

According to a report by GroupM, global advertising spending in measured media is expected to be approximately $502 billion in 2011, representing an increase of 5.8% over $474 billion in 2010. Spending in the U.S. is expected to be roughly 29.4% of the global forecast, an increase of 3.7% over $142.5 billion in 2010.

GroupM is the leading global media investment management operation, serving as the parent company to WPP media agencies including Maxus, MEC, MediaCom, and Mindshare.

WPP Group faces competition from its peers like Interpublic Group of Companies Inc. (IPG), Omnicom Group Inc. (OMC), and Publicis Groupe SA (PUBGY.PK).

We currently maintain an Outperform recommendation on the company.

 
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