S4 Capital mulls merger with private equity-owned peer MSQ Partners
S4 Capital PLC on Monday confirmed it has received a merger proposal from MSQ Partners Group Ltd.
Responding Sky News report at the weekend, S4 Capital said discussions with its fellow London-based advertising agency about a possible combination were still ‘at a very preliminary stage’. If a deal were to proceed, it would be structured as a buyout of MSQ by S4 Capital, the latter noted.
MSQ is majority-owned by New York-based private equity firm One Equity Partners. Sky News on Saturday reported that One Equity was among several companies to contact Martin Sorrell, the founder & chair of S4, about a possible merger, though the other suitors could not be identified.
S4’s announcement on Monday was arranged by Sorrell ‘without the prior agreement or approval of MSQ’.
It followed s a profit warning from S4 back in June, when the advertising agency predicted full-year revenue decline in the low-single digits. Previous guidance was for revenue to remain largely flat on-year.
Sorrell, the former head of WPP PLC, attributed the downgrade in expectations to ‘wider market uncertainty and significant volatility in global economic policy, particularly as a result of the US-imposed tariffs’.
Still, June marked S4 Capital’s first final dividend declaration of 1 pence per share, or GBP 6.1 million in total, with guidance for a stronger second-half weighting than the year prior, thanks to revenue contributions from new clients such as General Motors Co, Amazon.com Inc and T-Mobile US Inc.
S4 shares were up 9.7% to 23.25 pence on Monday morning in London for a market capitalisation of £142.3 million. The stock has fallen 56% in the past 12 months.
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