Zacks_Analysts' Blog : WPPGY to Acquire A4A - Analyst Blog

Advertising titan, WPP plc’s (WPPGY) global communications group, JWT recently entered into a contract to acquire a majority stake in A4A, a Chinese service digital agency. Completion of the acquisition is subject to regulatory approvals.

The strategic investment supports the company’s expansionary plans and operations in fast growing emerging markets, which enables access to vast untapped markets in these regions. A4A was founded in 2003 and currently employs over 80 people. The agency generated roughly RMB 16.2 million in gross revenues for the year ended 31 December 2010. Gross assets for the same period were RMB 12.2 million.

The target agency specializes in providing digital strategy, social media communication strategy, rich media, online advertising, search marketing, e-marketing, and media investment management. Its vast client base includes names like Audi, Lenovo, Mamibuy and Nokia.

Recently, WPP plc’s wholly-owned operating companies also carried out a series of acquisitions.Kantar raised its stake from 49% to 100% in Lanka Market Research Bureau (Private) Limited (LMRB). Burson-Marsteller announced agreements to acquire a majority stake in South Africa-based, Arcay Communications Holdings (Pty) Limited. Ogilvy & Mather inked a deal to acquire a majority stake in Promo Digital LLC, a digital marketing services agency in Russia.

The current Zacks Consensus EPS Estimates for WPP Group are $4.84 and $5.36 for the fiscal years 2011 and 2012, respectively. The estimates represent 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 (PUBGY.PK).

We currently maintain a Neutral recommendation on the stock.