Sir Martin Sorrell, founder and former head of advertising giant WPP, is back with a new venture - and it’s hard to decide what’s more remarkable about it. 

Is it that it has taken him just six weeks since leaving WPP, under still undisclosed circumstances, to launch a new venture? Is it that the 73-year-old, who some criticised for failing to adapt WPP to technological change, plans to lead what Sky News calls a “next-generation” marketing services group? Is it that he has immediately secured financial backing from Lombard Odier, Miton, Lord Rothschild, Schroders, Toscafund, and Dowgate Capital? Or is it that none of these backers appears to care about the investigation of misconduct allegations against him prior to his departure from WPP - allegations that he denies? Or is it that they seem to know enough to back him - while WPP shareholders are being advised to vote against the group’s chairman over his refusal to publish the allegations?

Arguably, it is all equally remarkable, inexplicable but, in many ways, predictable. 

Just weeks after telling WPP staff that “WPP is not just a matter of life or death… it was, is and will be more important than that”, Sky notes that Sir Martin was already discussing the next generation of advertising agency at a New York conference. Industry watchers also point out the absence of a non-compete clause in his WPP contract. 

And he appears to be adopting exactly the same tactics he used to create WPP out of shell company Wire and Plastic Products more than 30 years ago. According to a stock exchange announcement this morning, Sir Martin is to take the helm at Derriston Capital, a listed cash shell, which will then acquire S4 Capital, a new entity that he has set up to acquire advertising businesses.

S4, which will replace Derriston as the company's name, is apparently a reference to four generations of Sir Martin's family. Perhaps that what he means about a “next generation” group. 

It will pursue “a new corporate strategy to build a multi-national communication services business, initially by acquisitions”.

"He's borrowing from the same playbook," one of his backers told Sky, in reference to the early days of WPP.

Sir Martin is committing £40m of his own money to the new venture, today’s announcement says, with institutional investors initially providing another £11m, to complete a £51m equity fundraising. S4 also has “substantial non-binding letters of support from a number of its institutional investors indicating that they would, in principle, be willing to provide over £150m of further equity funding to support S4 Capital's acquisition plans”.

But WPP shareholders are likely to infuriated by the move, which sets up their former chief executive as a direct and well-funded competitor. They have already been advised by proxy agencies Glass Lewis and PIRC to oppose the re-election of chairman Roberto Quarta at their annual general meeting, because of his refusal to publish the allegations made against Sir Martin.

WPP has has said it is not permitted to reveal additional information about the investigation of any allegations owing to data protection laws and the legal agreement it reached with its founder.

Elsewhere, Royal Bank of Scotland’s chief financial officer is also pursuing “other opportunities” - announcing his departure to do so after four years with the state-rescued group. 

Ewen Stevenson, who joined RBS after spending most of his career with Credit Suisse, will remain in post “to oversee an orderly handover of his responsibilities”, the bank said this morning. A date for his departure has not yet been confirmed. 

However, a search for his replacement will start immediately - and it is a role that is likely to involve preparing the majority government-owned lender for a return to private ownership. 

Earlier this week, news reports citing unnamed “bankers” suggested the government could resume its privatisation of RBS imminently, with a £3bn-plus share sale. That would represent roughly 10 per cent of its current stake, reducing the total state holding to about 60 per cent.

RBS chief executive Ross McEwan said: 

“For the past four years Ewen has worked tirelessly with me and my executive team to make RBS a much simpler, safer and more customer focussed business and to resolve a number of major legacy challenges. When Ewen leaves RBS he will go with my enormous thanks and best wishes, he has been a fantastic CFO.”

And, finally, specialist printer De La Rue has got the blues - but not the Brexit passport variety. 

This morning, the blue cardboard passport supplier of choice to The Daily Mail and Tory MP Jacob Rees Mogg reported an 11 per cent fall in operating profit, in its first set of full-year results since losing out on the £260m contract. To a foreign firm. Not from these parts. With funny ways. 

Despite a 7 per cent rise in revenue in the year to March 31, to £494m, adjusting operating profit was more than decimated, year-on-year, to £63m.

De La Rue said:

“A significant reduction in the profitability of the paper business was the major factor causing the profit decline,” which included costs associated with the failed passport bid.

Since that much heralded failure, the group has issued two profit warnings and seen its share price fall 22 per cent. In April, it downgraded its full-year underlying operating profit guidance to around £60m. 

However, its 12 month order book excluding paper orders — an arm of the business that was sold — was up 6 per cent. Rule Britannia! 

Today’s Lombard column asks what JAB’s deal for Pret A Manger means for Whitbread’ s Costa Coffee:

Alison Brittain, chief barista at Whitbread, could be forgiven for choking over her Costa coffee on Tuesday morning. JAB Holdings, the Luxembourg investment vehicle of the ultra well-heeled Reimann family, has agreed to pay £1.5bn for Pret A Manger’s 500 food-to-go stores as well as its debt. That is a frapuccino of a valuation at 15 times the group’s earnings before tax, amortisation and other nasties this year… If JAB is happy to pay such a full-fat price for the snack-sized Pret, what might it have stumped up for Costa Coffee, which is the world’s second-largest coffee chain after Starbucks and raking in 1.5 times Pret’s revenues? 

Read the rest of today’s Lombard column here

FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can receive it by email at 8am every morning by signing up here.

Get alerts on Martin Sorrell when a new story is published

Copyright The Financial Times Limited 2021. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article