By Kate Holton
(Reuters) - Martin Sorrell is staging a comeback just six weeks after he was ousted from WPP (L:WPP), using the same formula as in the 1980s when he transformed a little-known shell company into the world's biggest advertising group.
One of Britain's best known businessmen, Sorrell said he would invest 40 million pounds of his own money into Derriston Capital (L:DERR) while institutional investors have pledged 150 million pounds to buy marketing companies.
The London-listed group will be renamed S4 Capital, in reference to four generations of Sorrell's family, while he will become executive chairman.
Its next moves are likely to be closely watched in an industry facing questions over whether the ad guru's model is still the best way to deliver adverts, marketing, research data and media buying in a digital world.
WPP and its peers have struggled in recent years as major consumer goods groups such as Unilever (LON:ULVR) trimmed spending on marketing and took some services in house, while consultancies such as Accenture have stepped up competition and Facebook (NASDAQ:FB) and Google (NASDAQ:GOOGL) dominate the online ad market.
"S4 Capital is a company that aims to build a multi-national communication services business focused on growth," the 73-year-old said. "There are significant opportunities for development in technology, data and content."
The new company, which has raised 51 million pounds through Sorrell and institutional investors including Lombard Odier, Miton, a Rothschild investment unit, Schroders (LON:SDR) and Toscafund, is in early talks over a number of potential acquisitions.
The group is looking to buy assets in the faster growing part of the industry such as technology and data which can be used to maximise the effectiveness of advertising, while markets such as India could also be of interest.
TRIED AND TESTED
Taking charge of a listed shell company repeats the tactic Sorrell used in the 1980s when he took a stake in Wire and Plastics Products, a maker of shopping baskets, and used it as a vehicle to buy some of the most famous advertising agencies such as JWT and Ogilvy & Mather.
Derriston Capital is a little-known two-year-old listed shell company set up to invest in medical technology.
Over 30 years Sorrell built WPP into a company with 200,000 staff in 112 countries by adding market research groups, media buyers, and public relations firms such as Finsbury.
Worth 16 billion pounds, WPP returned millions to shareholders, including its CEO, and dominated the industry for decades. According to Thomson Reuters data, Sorrell is still the eighth biggest investor in WPP, with a 1.4 percent stake.
Sorrell had vowed to break down the barriers at WPP to make it easier for clients to get all the services they needed from a small team, rather than from a range of people among the more than 400 agencies it owned.
Starting again should make it easier to mould a business more aligned to the needs of today.
WPP competes with U.S. groups Omnicom (N:OMC) and IPG (N:IPG), France's Publicis (PA:PUBP) and Japan's Dentsu, while thousands of small independent companies provide everything from ads for mobile phones to creative work and data analytics.
Sorrell quit WPP after the board opened an investigation into an allegation of personal misconduct.
The company has not given any details and Sorrell has denied any wrongdoing. He told staff he had stepped down because the disruption was putting too much pressure on the business.