WPP Group: Merger & Joint Venture - Analyst Blog

Advertising titan WPP Group plc's (WPPGY) public relations and public affairs companies, Hill & Knowlton and Public Strategies Inc., will merge on January 1, 2011. These companies will, however, retain their brands going forward.

Public Strategies Inc. is engaged in public relations and public affairs providing counseling to organizations in matters such as crisis management, litigation communications, long-term communication planning, public opinion research, government relations, media relations and issue-based advertising.

Hill & Knowlton, among the largest public relations and public affairs companies worldwide, provides integrated programs locally or globally to its clients.

The combined entity with efficient financial services, public affairs, research and digital capabilities will be a major communications consultancy globally. It will employ over 2300 employees in its 83 offices in 44 countries.

Apart from this, Ogilvy & Mather China formed a joined venture with Apex Communications, a leading Chinese integrated marketing agency exposed to brand consulting, location branding, digital and advertising. Apex Communications is based in Chengdu, China.

Ogilvy & Mather China, via this venture, aims at strengthening its foothold in the Chinese region, especially in its second tier cities in order to expand its operations in Greater China having more than 15 agencies  in 17 cities.

In addition, Apex Communications'  resources, knowledge and know-how will enable Ogilvy & Mather China to tap the growing demand for professional skills, marketing services and digital capabilities in the western region.

Leading in communication services, 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.

At its third quarter 2010 trading update, the company reported its top-line growth of 12.2% year over year with revenue above the Zacks Consensus Estimate of US$3,470 million. Based on the results in the first nine months of 2010, management predicted that its full year 2010 margin would exceed the company's margin target of 1.0%.

The company faces competition from its peers like Interpublic Group of Companies, Inc. (IPG), Omnicom Group Inc. (OMC), and Publicis Groupe SA. We currently maintain an Outperform recommendation on the company.

 
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