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Mark Penn’s Stagwell Group Takes Stake in MDC Partners

Mr. Penn will become MDC’s CEO and join its board of directors

The talks between MDC and Stagwell as well as Mark Penn’s possible appointment as CEO of MDC were reported by The Wall Street Journal last week.


Stagwell Group, an ad company founded by Mark Penn, agreed to acquire a minority stake in ad-holding company MDC Partners Inc. for $100 million, the companies said Thursday.

Mr. Penn, a Madison Avenue veteran and former adviser to Bill and Hillary Clinton, will also join the board of MDC and assume the role of chief executive officer, ending a roughly six-month search to replace Scott Kauffman.

The talks between MDC and Stagwell as well as Mr. Penn’s possible appointment were reported by The Wall Street Journal last week.

Stagwell’s purchase of MDC’s common and preferred shares could allow it to control nearly 30% of the company. Stagwell purchased $50 million of class A shares at $3.50 per share—an 18% premium to a 30-day average closing price of $2.96 per share. It is also paying $50 million for convertible preferred shares with a $5 conversion price.

MDC Partners’ share price closed at $2.03 on Thursday.

MDC Partners, which owns several well-regarded creative agencies including 72andSunny, Anomaly, and Crispin Porter + Bogusky, has been bruised by marketers cutting costs and a mound of debt, which tops $1 billion. Shares of MDC have dropped by more than 60% over the past year.

“You’ve got to provide offerings for today’s CMOs who increasingly want more for less and who want to make sure you can deliver across all mediums,” Mr. Penn said in an interview Thursday. “The biggest challenge for MDC is getting all the agencies firing on strong cylinders. Some agencies are doing quite well. Some have run into real headwinds.”

Mr. Penn said he plans to create cost savings of at least $35 million in his first year by centralizing various back-end resources. He also wants to generate additional client business across agencies—selling media-agency services to creative agencies’ large brand clients, for example.

Mr. Penn also sees an opportunity for the firms at Stagwell and MDC Partners to work together.

“There’s a lot of potential for collaboration,” he said. “Stagwell has limited creative resources and tremendous research resources. MDC has tremendous creativity and more limited research resources.”

MDC has had a challenging year.

A few months ago, FrontFour Capital Group LLC, a Connecticut hedge fund, launched an effort to shake up the board of the embattled agency group.

In September, the Journal reported that MDC was exploring a sale amid a slowdown in its performance and following the exit of Mr. Kauffman.

Mr. Penn tried to buy all of MDC and had preliminary talks with private-equity firm Apollo Global Management to advance the effort, but an agreement wasn’t reached between the two, according to people familiar with the matter.

Mr. Penn worked for ad giant WPP PLC before a stint as Microsoft Corp.’s chief strategy officer. He is best known for being one of the primary architects of President Clinton’s re-election campaign in 1996 and served as a chief strategist for Mrs. Clinton’s 2008 presidential bid.

In 2015, he started Stagwell with $250 million in funding, including money from former Microsoft Chief Executive Steve Ballmer. The firm has made roughly 20 investments in marketing and communications shops, including digital agency Code and Theory, research company Harris Insights & Analytics and public-affairs agency SKDKnickerbocker.

“Tasks of scale and even tasks of chaos are something I’m really familiar with,” Mr. Penn said.

Stagwell, which is profitable, generated roughly $500 million in revenue in 2018, up from $275 million in 2017, according to a person familiar with its financials.

“Throughout his career, Mark has proven himself a powerful strategic operator and passionate supporter of agencies,” said Irwin Simon, presiding director of the MDC Partners’ board of directors, in a statement. “He shares our vision and our values, and his background as a marketer, agency founder, global thought leader and investor will be critical to bolstering our structure, solutions and services.”

Write to Alexandra Bruell at alexandra.bruell@wsj.com

Appeared in the March 15, 2019, print edition as ‘Ad Company Stagwell Buys MDC Stake for $100 Million.’

To read more: https://www.wsj.com/articles/mark-penns-stagwell-group-takes-stake-in-mdc-partners-11552598706