Japan's third largest agency ADK (or Asatsu-DK) still trails behind leaders Dentsu and Hakuhodo. Original core agency Asatsu closed the gap a little as a result of a 1999 takeover of Dai-Ichi Kikaku, then the #7 agency, now the DK in ADK. Shortly afterwards, the company forged a strategic alliance with UK-based marketing services giant WPP, secured by a 25% shareholding that made the British group ADK's largest shareholder. That relationship made ADK arguably the most Western-leaning Japanese agency after Dentsu, even if the partnership was restricted to Asian markets. Yet in a dramatic turn of events in 2017, ADK gave its formal backing to a private equity buyout offer from Bain Capital and gave notice that it wanted to terminate its 20-year partnership with WPP. Following a brief skirmish over legal rights and terms, the British group finally agreed to surrender its shares and the buyout completed in early 2018. Bain Capital is now sole owner of the business. ADK is repositioning itself as a "consumer activation company" with three main operating units: creative hub ADK Creative One, media and promotional agency ADK Marketing Solutions, and rights and content manager ADK Emotions. There are also several satellite units, such as creative boutique Cherry, and ADK retains shareholdings in two digital joint ventures with Dentsu: Drill and DA Search & Link. Without the WPP partnership, ADK has a much more restricted international footprint. There are outposts in China and several markets in South East Asia, but only two in the West: in the US and the Netherlands, both working mainly for the local operations of Japanese companies. Shinichi Ueno is group CEO. Gross billings for 2017 were approx $3.2bn, with best-ever gross profit (revenues) of approx $485m.
Capsule checked 29th November 2018
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Adbrands Weekly Update 7th Dec 2017: Private equity fund Bain Capital announced victory in its bid to acquire Japan's third-largest marketing group ADK. Leading shareholder WPP, which had originally opposed the buyout, reversed its position two weeks ago and agreed to tender its own near-25% stake. That appears to have prompted other minority shareholders to follow suit and accept Bain's terms, which valued ADK at $1.4bn. By close of play yesterday, Bain had accumulated 87% of ADK's equity. "Today’s successful tender offer close is an important milestone in ADK’s growth story," said ADK CEO Shinichi Ueno. "We are confident that Bain Capital is the right partner to take us through this next phase of transformation."
Adbrands Weekly Update 23rd November 2017: In a surprise turnaround, WPP has abruptly withdrawn its objections to a private buyout of Japanese marketing group ADK by Bain Capital, despite several weeks of outspoken objections to any such proposal. WPP had even initiated legal proceedings against ADK to block the proposed break-up of their two-decade partnership. Yet despite the tough talks over the past few weeks, WPP has now, seemingly overnight, agreed to accept the buyout at the original price offered by Bain of around $33 per share. It had previously said that price undervalued ADK. According to Bain, the two sides are even in talks over the possibility of WPP taking a fresh minority holding in a new entity controlling ADK. Bain's offer - and WPP's acceptance of it - are conditional upon acceptance by a majority of shareholders. WPP has agreed to surrender its own 24.9% holding. No reason was given for the volte-face, but it may have something to do with WPP's own sagging market valuation. Its stock price has been in steep decline following a series of disappointing quarterly results. From an all-time high in March, WPP's shares have slumped to a three-year low.
Adbrands Weekly Update 5th Oct 2017: Private equity fund Bain Capital launched a surprise bid for Japan's third-largest advertising agency, Asatsu-DK. The offer values the publicly quoted agency at around $1.5bn, roughly 15% above its pre-announcement market value, and has the full support of ADK's board. CEO Shinichi Ueno said “In collaboration with Bain Capital, we will set a course towards bold structural reforms and growth strategies that will help us to enhance our competitiveness and to expand our market share, both in Japan and overseas." However, the deal doesn't appear to be supported by ADK's biggest shareholder WPP, which holds around 25% of equity to anchor a 20-year global partnership between the two groups. However, the Japanese group says the two companies now disagree on strategy, and that it hopes to unwind their partnership. It said that relationship now plays "less of a strategic role in the company’s ongoing development, and has not materially contributed to the profits of the business". Several media outlets quoted "people close to WPP" who suggested that the offer "serious undervalues" ADK's second largest shareholder Silchester International Investors, with 17%, also said the deal is too cheap. Bain's offer is contingent on it accumulating at least a majority of ADK's shares. The markets are betting it will have to raise its price to get there: ADK's shares have soared by more than 20% following the announcement, pushing the group's valuation to around 5% above Bain's offer.
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