WPP, Hakuhodo Buy 50 Percent of Shanghai Advertising
WPP, the world's largest ad agency holding firm, and
Hakuhodo, Japan's largest ad agency, have together bought
a 50 percent stake in Shanghai Advertising, one of the
China's largest ad agencies. The terms of the purchase
were not disclosed.
London-based WPP is the parent company of J. Walter Thompson,
Ogilvy & Mather and Young & Rubicam. It is founded
and headed by Sir Martin Sorrell, who started his career
at Saatchi & Saatchi.
Shanghai Advertising is one of China's largest and most
established ad agencies, and by the early 90s already
had a reputation as one of the leading local Chinese ad
agencies.
Shanghai Advertising's chairperson Guo Lijuan said that
during the negotiations to purchase the shares, WPP and
Hakuhodo showed that they were anxious to work together
after the sale to jointly manage Shanghai Advertising.
After they disclosed their intentions, Shanghai Advertising
quickly proceeded to negotiate the price and terms of
the sale. Although the price was not disclosed, it is
believed that they paid more than double the asset value
of Shanghai Advertising to get their share.
J. Walter Thompson, Ogilvy & Mather, Young &
Ribicam and Hakuhodo have already entered the China market,
and are established in all of the major cities.
The Chinese government currently has many restrictions
on foreign advertising companies entering China. Foreign
ad companies are not allowed to enter China as wholly-owned
foreign entities, and must enter into joint ventures with
local parties. They must invest at least US$500,000, and
their share cannot be more than 50 percent. Regulations
also require that the chairperson must be Chinese.
However, these regulations will all end in 2005 as a
term for China's joining the World Trade Organization
(WTO). China joined the WTO in 2001.
There is currently a severe shortage of advertising media
in China, as more companies are advertising to build their
brands and develop sales. All media companies are at least
partly owned by the Chinese government, which continues
to keep a tight hold on media.
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