Zacks_Analysts' Blog : WPPGY on an Acquisition Spree - Analyst Blog

Advertising titan WPP plc (WPPGY) is making all efforts to expand its operations in fast growing emerging markets by making strategic acquisitions and enabling access to vast untapped markets in those regions. Most of the acquisitions are given effect through the company’s wholly-owned subsidiaries.

Recently, Kantar, the consumer insight group of WPP plcraised its stake in Lanka Market Research Bureau (Private) Limited (LMRB) from 49% to 100% by acquiring the latter’s remaining shares. LMRB is Sri Lanka’s leading market research agency and has a vast client base including Unilever Sri Lanka Ltd, Fonterra Brands Lanka (Pvt) Ltd, SmithKline Beecham (Pvt) Ltd and Dialog Axiata PLC.

LMRB was founded in 1981 and employs over 81 people. The agencygenerated roughly LKR 175 million in gross revenues for the year ended 31 December 2010. Gross assets for the same period were LKR 138 million.

Also, recently, WPP plc’s global public relations and public affairs firm, Burson-Marsteller announced agreements to acquire majority stake in South Africa-based, Arcay Communications Holdings (Pty) Limited.

The target firm is a leading consultancy firm in South Africa with its client base including names like BHP (BHP), Danone, Discovery, HP (HPQ) and McDonald's (MCD). As of March 31, 2011 Arcay’s gross revenues were about ZAR 15.6 million with gross assets reaching ZAR 8.7 million.

Furthermore, WPP’s operating company and its global marketing communications group, Ogilvy & Mather recently inked a deal to acquire majority stake in Promo Digital LLC, a digital marketing services agency in Russia. The latter was founded in 1997 and employs over 53 people.

The acquisition will enable Ogilvy & Mather to gain access to Promo’s client base including Gazprom, LG and MTS. As of December 31 2010, the Russian firm generated gross revenues of approximately RUR 86 million with gross assets of RUR 63 million.

The current Zacks Consensus EPS Estimate for WPP Group is $4.84 and $5.36 for the fiscal years 2011 and 2012, respectively. The estimate represents a year-over-year growth of 29.45% for 2011 and 10.80% for 2012.

Based in Dublin, Ireland, WPP Group plc provides advertising and communications services worldwide. The company faces stiff competition from its peers like Interpublic Group of Companies Inc. (IPG), Omnicom Group Inc. (OMC), and Publicis Groupe SA.

We currently maintain a Neutral recommendation on the stock.