Banks in pounds 200m WPP share sale

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The Independent Online
A SYNDICATE of 20 banks is planning to sell almost all its shares in WPP, the advertising group, in a pounds 200m international placing this autumn.

The placing, to be carried out by SG Warburg, Bankers Trust and JP Morgan, is expected to take place shortly after the banks convert their WPP preference shares into 200 million ordinary paper shares in early September.

They received the shares as part of a dollars 272m ( pounds 176m) debt- for-equity swap two years ago, when WPP, under chief executive Martin Sorrell, ran into severe financial difficulties because of huge borrowings and a deep recession in the American and European advertising markets.

Most of the banks took part in a sale of about 50 million WPP shares for a pounds 16m profit last year, after converting a quarter of their preference stock into equity.

It is understood the banks now plan to dispose the rest of their holdings in two months through a co-ordinated placing with British and overseas institutions.

The disposal is expected to net the banks a total profit of about pounds 100m.

Discreet marketing of the sale has already begun on both sides of the Atlantic by the three advisers to gauge the level of demand. However, the placing price of the shares is yet to be finalised.

Although the price is likely to be fixed at a significant discount to WPP's market price, the banks are certain to make a killing on the sale - they were granted the conversion rights at a notional price of about 45p a share against the current price of 110p, up 1p on Friday.

The banks are understood to have opted for a co- ordinated and single large disposal to maximise proceeds. A piecemeal sale would have sparked fears of a serious overhang of unsold WPP paper, depressing its share price.

With the company's main advertising agencies, J Walter Thompson and Ogilvy & Mather, gaining from improved market conditions, analysts believe the placing could attract considerable interest.

WPP, helped by falling interest charges and improving margins, is expected to report a strong improvement in first- half profits on 10 August.

Neil Blackley, media analyst at Goldman Sachs, is forecasting that taxable profits will rise from pounds 24m to pounds 36m, despite an only marginal increase in revenue growth in the first half to 30 June.