‘Quiet activist’ builds £500m stake in WPP as shares slide

Silchester could agitate for a change of chairman or even a break-up

A “quiet activist” has built a £500m stake in WPP amid speculation the ad giant could face pressure to break up its business.

London-based Silchester International Investors has increased its holding in WPP to more than 5pc, making it the third largest shareholder.

Silchester was described as a “quiet activist” pushing for change behind the scenes by another shareholder, who suggested Silchester could agitate for a change of chairman at WPP or even a break-up of the group.

Roberto Quarta, who has chaired the ad giant since 2015, is approaching the end of the nine-year term recommended under UK corporate governance rules.

Pressure for change comes after shares in WPP slumped by more than a quarter over the last year. One part of the business that could be divested is GroupM, WPP’s media business, which represented 37pc of total revenue last year.

Silchester, which pulled in pre-tax profits of £197m on assets under management of almost £32bn last year, also holds significant stakes in Tesco, GSK and B&Q owner Kingfisher.

But the Mayfair-based fund, which was set up in 1994 by British multi-millionaire Stephen Butt, has largely remained under the radar. The company declined to comment.

Silchester’s increased stake comes as WPP grapples with a looming slowdown in the digital advertising market amid wider troubles across the economy.

In October, the ad group raised its revenue targets for the full year but said rising costs would eat into its profit margins. Mark Read, who has led WPP since the acrimonious departure of Sir Martin Sorrell in 2018, said the firm was facing a “challenging year”.

WPP’s market capitalisation has fallen to just over £9bn – down from a peak of around £25bn in 2017 – valuing Silchester’s stake at £470m.

It is understood that Silchester was offered a meeting with WPP management following its third-quarter results, but turned down the offer.

A source close to WPP denied that it was facing calls from investors for a break-up or sale, adding that the market would better reflect WPP’s value once its digital transformation programme was complete.

This week WPP snapped up Fenom Digital, a New York-based digital agency, while in December it acquired Canadian commerce agency Diff.

A WPP spokesman said: “WPP has transformed its business in the past four years, substantially strengthening its balance sheet while also returning very significant funds to shareholders. 

“It was awarded most Creative Company at the most recent Cannes Lions awards and the success of the proactive simplification of its business was demonstrated by its appointment as the Coca Cola Company's network marketing partner, the largest pitch in the industry’s history.”

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