MDC Partners and Stagwell, both led by Mark Penn have entered into a definitive agreement to merge, subject to various approvals, including a thumbs up by a majority of MDC Partners shareholders and regulatory and stock exchange approvals.
Certain bondholders also have to sign off on waivers and amendments to their notes for the deal to go through as currently structured.
Stagwell formerly proposed the merger in June and late last night the company said it expected the deal to be completed in the first half of 2021.
Penn, current CEO and Chairman of MDC and Managing Partner of Stagwell, will continue as CEO and Chairman of the combined company. The management team for the company will consist of existing executives from both MDC and Stagwell.
The board of directors of the firm would consist of nine members, including Penn and Bradley Gross, an existing director who is also a managing director in the merchant banking division of MDC investor Goldman, Sachs & Co.
Three independent directors on the Board will continue as directors in the merged company and Stagwell will designate another four directors to serve on the new Board. The newly formed company would remain headquartered in New York and will maintain a significant presence in Washington D.C.
Existing MDC common shareholders will receive 26% of the common equity of the combined company and Stagwell will receive share consideration equal to 74% (excluding Stagwell’s pre-transaction holdings of MDC common shares). With 8,600 employees across 26 countries the merged company’s shares would trade on the NASDAQ exchange under the firm’s existing stock symbol “MDCA.”
“This is a new day for MDC and Stagwell,” stated Penn. “Together, they unleash precisely the right talent and technology to create a transformative marketing services company offering scaled creative performance.”
“MDC,” he added, “is celebrated for bringing award-winning creative firepower to the world’s leading and most ambitious companies, and Stagwell has been built with deep and sophisticated technology at its core. Unencumbered by legacy structures or assets, the combined company will have the integrated, modern offerings marketers deserve, and the resources to invest meaningfully in our global capabilities, our talent, and our clients’ future.”
The MDC roster of agencies includes 72andSunny, Anomaly, Crispin Porter Bogusky and Assembly. Stagwell shops include Code And Theory, Harris Poll and Finn among others. The merged company would manage about $4.4 billion in annual media spend and the company hopes to generate $3 billion-plus in revenue by 2025 up from more than $2 billion that MDC and Stagwell generated separately in 2019.
Penn has had his eye on a potential merger with MDC for years. In 2019, he invested $100 million in the holding company and was named its Chairman and CEO.
The firm has struggled to recover from a financial scandal in 2015 when its founder and former CEO Miles Nadal was caught taking millions out of the company in the form of illicit expenses. He was forced out and paid back about $20 million. That year the firm’s stock was trading in the high-$20 per share range but quickly sank to a low-single-digit price.
Monday the stock closed at $2.23 but was up 17% in after-hours trading.