WPPGY to Acquire I-Behavior - Analyst Blog

Ireland-based advertising titan WPP Group plc (WPPGY), through a unit of Wunderman network, KBM Group, will be acquiring I-Behavior Inc. a Colorado-based company.

The completion of the transaction is subject to regulatory approval and the approval of I-Behavior's shareholders.

The acquisition of the privately-held database marketing business fits well into WPPGY's strategy of expanding through procurement of knowledge-based marketing solutions businesses in the new and growing markets. I-Behavior's prime customers include retailers, financial services firms, catalogue sellers, consumer magazines and business-to-business companies.

I-Behavior employs over 83 people and expects revenue for fiscal 2010 to reach around $25 million.

WPP Group Plc 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.

In the third quarter of 2010, WPPGY reported revenue increased 12.2% year over year attributable to strength across all geographical regions and communication services sector.

On a constant currency basis, revenue grew by approximately 8.1%. Excluding the impact of acquisitions and currency fluctuations, revenue was up 7.5% in the reported period. Based on the results in the first nine months of 2010, management anticipates that its full-year margin would exceed the company's margin target of 1.0%.

Despite concerns over rising competition and sustainability of US growth, we believe that the company has the potential to deliver solid results in the quarters ahead. We currently maintain our Outperform recommendation on the stock.