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THE NEWS: Martin Sorrell has stepped down as chief executive of WPP after an investigation into an allegation of personal misconduct concluded, ending his more than three decades atop the company he founded in 1986 and built up to become the world's largest advertising holding.

BACKGROUND: Mr. Sorrell learned in late March that WPP's board had hired U.S. law firm WilmerHale to investigate an allegation of personal misconduct. Following weeks of efforts to maintain business as usual, Mr. Sorrell said Saturday that he is leaving to protect the interests of the company, its clients and other stakeholders. His departure is being treated as a retirement and he will receive prorated stock options that will vest over the next five years and which would be valued at around $27 million based on WPP's current share price.

THE PROBE: On April 3, The Wall Street Journal reported that WPP's board was looking into whether Mr. Sorrell had misused company assets. WPP said the amounts in question weren't material to the company, and Mr. Sorrell denied any wrongdoing. WPP later said in an internal memo that the probe wasn't related to client business and that investigation details would remain confidential.

WHAT'S NEXT: Finding a replacement for Mr. Sorrell won't be easy, since he was involved in almost every aspect of the business. The new CEO will inherit a company going through a structural shift as it confronts continued pressure on the advertising sector. WPP's share price has dropped more than 30% over the past 12 months as it has delivered a string of disappointing results.

In the short term, WPP Chairman Roberto Quarta will assume the role of executive chairman until a new CEO is appointed. Mark Read, head of WPP agency Wunderman, and Andrew Scott, WPP's corporate development director and chief operating officer for Europe, have been appointed as joint-chief operating officers.

ANALYSTS' TAKES:

-New leadership is likely to accelerate WPP's structural shakeup and a strategic review could lead the group to slim down operations by a quarter to a third, analysts at Numis say.

-Mr. Sorrell's departure dramatically increases the chances that significant chunks of the business will be sold off, according to Liberum. The bank thinks WPP's market-research and PR units are the obvious choices for a sale, and estimates that these could fetch up to 3.5 billion pounds ($4.31 billion) and GBP1.8 billion, respectively.

-The main potential positive outcome from a change in management would be a more rapid and more radical restructuring to answer the industry's current woes, says Barclays.

FULL STORY ON WSJ.com: https://on.wsj.com/2qC7rAH

Write to Barcelona editors at barcelonaeditors@dowjones.com

(END) Dow Jones Newswires

April 16, 2018 04:02 ET (08:02 GMT)

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