Tempers flare as Sorrell beats WPP in battle for Dutch agency

By Kate Holton

LONDON (Reuters) - Martin Sorrell beat WPP in the race to buy a Dutch digital agency on Tuesday, infuriating his former company and revealing the animosity raging between the two sides.

Sorrell left the world's biggest advertising group WPP in April over a complaint of personal misconduct. Leaving without a non-compete clause, he set up a new company weeks later and took on his former firm in a bid battle for the agency MediaMonks.

Incensed, WPP had warned Sorrell that he would lose his multi-million pound share awards if he did not back off, arguing that their former CEO and founder had known about its interest in the agency before he left.

Having consulted lawyers, the world's most famous advertising man pressed on regardless through his new vehicle, S4 Capital.

"WPP's lawyers wrote to Sir Martin's lawyers last week pointing out the breach of Sir Martin's confidentiality undertakings in his approach to MediaMonks after his resignation from WPP," a spokesman for the FTSE 100 company said.

"Despite subsequent protestations from Sir Martin's lawyers, we are well aware of the facts and he has jeopardised his LTIP entitlement."

Sorrell, who built WPP from a two-man operation into the world's largest advertising group with over 200,000 staff in 112 countries, had been entitled to share awards worth up to 20 million pounds in future payments as part of a long-term incentive plan.

That is now in doubt after he agreed a 300 million euro deal to buy MediaMonks, a digital agency that employs more than 750 people in 10 countries to create content and campaigns for clients including Adidas, Amazon, Google, Netflix and Hyundai.

WPP had been interested in acquiring the firm, along with other industry rivals such as Accenture Interactive. A person familiar with WPP's thinking said they had baulked at the price.

"S4 Capital seems to have abandoned commercial considerations in its desperate pursuit of landing the asset," the source said.

A NEW ERA

Sorrell said the deal represented the first move by S4 Capital to create a "new era, new media solution embracing data, content and technology".

The Briton is seen as the godfather of the advertising holding companies that have dominated the industry for decades, providing strategy, media buying, research and data analytics.

In recent years, however, many clients have complained that these groups are now too slow to meet their needs in a digital world. WPP, with a market cap of 15 billion pounds and more than 400 separately-run agencies, has said it needs radical change.

Starting from scratch, Sorrell says his new business will be built to create content for clients where and when they need it. As he makes more acquisitions the group will be run on a unified basis on one set of accounts, to encourage collaboration.

MediaMonks was bought with shares and cash, with the owners of the agency set to own around 20 percent of the new group. Unlike many media deals, the owners will not receive an earn-out, in a bid to keep them within the company and incentivised to help the wider group succeed.

Sorrell will now work to broaden the platform and develop further capabilities such as data analytics and digital media buying. He is also keen to enter Germany and India, either through organic growth or acquisition.

A source close to S4 Capital had told Reuters last week that they saw the WPP warning as an attempt to disrupt their bid and were satisfied with the legal advice they had received.

($1 = 0.8510 euros)

(Reporting by Kate Holton; editing by Sarah Young and Alexandra Hudson)