Martin Sorrell: Group M alone is worth as much as WPP's stock market value

Sir Martin Sorrell has suggested that the potential break-up value of WPP is a key reason for him keeping hold of approximately US$210 million worth of the ad group’s shares.

Appearing on business news channel CNBC last week, Sorrell was asked by anchorman Steve Sedgwick directly whether he thought WPP had outlived its purpose and indirectly why he chose to remain a shareholder. Sorrell is WPP’s largest individual shareholder with a 1.4% stake.

Sorrell said that WPP "has to change violently", going on to say that "what’s really interesting" is the value of Group M, the media planning and buying part of the group.

According to Sorrell, Group M is "probably worth about $15bn", on a level with the market value of the entire group. As of Monday, WPP’s market capitalisation was £12.21bn, equating to $15.05bn.

"Now, there is some debt there, so the enterprise value is higher," Sorrell conceded, "but the answer to your question is the break-up values of these companies, or the market values, are approaching levels which we haven’t seen for some time.

"Publicis bought Epsilon for $4bn. [In] Q2, their revenues are down 4%. Credit Suisse came out with a note downrating them yesterday. That’s, what, a month after announcing the acquisition – so the pressure in the legacy sector is huge."

Sorrell was eager to contrast "the legacy sector" with his new venture S4 Capital, which is focusing on growth sectors such as digital prodution and media.

"You know, we have a clean sheet of paper at S4, our top line is growing 40%, 45%, accelerating into the second half of the year," he said. "You look at the statistics around the US ad market – IPG came out with statistics for the first half – market’s up 6%, digital up 20%, traditional is down 3%. So managing the transformation and the change is key."