Aug 2, 2021 - Economy

Stagwell closes deal to combine with MDC Partners

Stagwell founder Mark Penn. Photo via Stagewell.

Stagwell, a D.C.-headquartered marketing services agency, said Monday it closed a deal to combine with MDC Partners, a global ad holding company based in New York.

Why it matters: It's the largest transaction in the advertising sector so far this year.

  • The combined company is expected to have revenues of over $2 billion in 2021, making it one of the top 10 largest ad holding groups in the world.
  • It gives Stagwell the scale and capabilities necessary to compete globally with larger ad holding groups.

Details: Last week, 78% of shareholders in MDC Partners voted to approve the deal, easily clearing the 2/3 majority approval required to complete the merger.

  • Under the deal terms, Stagwell now owns over 69% of the combined company. Former shareholders in MDC Partners will own roughly 31% of the combined company.
  • The combined company will start trading on the NASDAQ on Tuesday under the ticker "STGW." It will have over 10,000 employees.
  • The name MDC Partners will be sunsetted. The name of the newly combined company is Stagwell Inc.

Flashback: One of the largest shareholders in MDC Partners, Indaba Capital Management LP, had objected to the merger during the combination process earlier this year. Those issues were eventually resolved by giving former MDC shareholders a larger percentage of shares in the newly-combined company.

The big picture: Stagwell's goal is to build a new-age marketing services firm that relies on digital expertise and data to compete with legacy ad holdings companies that were created in an era when print and television were dominant.

  • The companied enterprise value of Stagwell will be around $3 billion. By comparison, the average combined enterprise value of the largest ad holding companies is around $10 billion.
  • Stagwell raised two rounds of funding — one in 2015 and one in 2018, totaling roughly $500 million — to help aid its expansion.

What they're saying: "We're going into the market now at best time in recent history for advertising," said Mark Penn, chairman and CEO of Stagwell Inc. He notes that in refinancing the company, he will save $20 million a year for the combined company.

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