Cash shell Derriston Capital (LSE:DERR) was thrust into the spotlight this morning after becoming the critical ingredient in former WPP boss Sir Martin Sorrell’s dramatic return to the London market. Derriston has agreed to acquire S4 Capital, a newly incorporated firm that has recently completed a £51m equity fundraise, with Sorrell contributing £40m of his own money.
The transaction constitutes a reverse takeover and will result in Derriston changing its name to S4 Capital and Sorrell taking over as executive chairman. Paul Roy, co-founder of investment management firm NewSmith Capital Partners, and Rupert Walker, WPP’s former adviser, are also expected to also join S4’s board as non-executive directors. Derriston’s current board members – Harry Hyman, Roger Sargent, and James Serjeant – will all resign when the deal completes.
Derriston was created in 2016 as a cash shell to make acquisitions within the global medical technology industry before widening its mandate to the entire technology sector last August. Before its shares suspended today in line with stock market rules around reverse takeovers, it had a market cap of just £2.9m.
As S4 Capital, it will aim to become a multi-national business in the communication services, initially focusing on generating growth through acquisitions. As Sorrell put it: “S4 Capital is a company that aims to build a multi-national communication services business focused on growth. There are significant opportunities for development in technology, data and content. I look forward to making this happen.“
S4 said institutional investors have already indicated that they would, in principle, be willing to provide over £150m of further equity funding to support its acquisition plans. According to Sky News, the backers of Sorrell’s plans include Lombard Odier, Miton, Lord Rothschild’s RIT Capital Partners, Schroders and Toscafund. S4 added that it is already in preliminary discussions for a select number of potential acquisitions.
Today’s news marks a return to the limelight for Sorrell just six weeks after his sudden departure from advertising agency WPP amid personal misconduct allegations. Sorrell had been the longest-serving director in the history of the FTSE 100, joining WPP as chief executive back in 1986. In 2016, he was paid just over £70m, the bulk of which was generated by a long-term incentive scheme, and he continues to hold share options worth an additional £19m in WPP.
His WPP contract did not have a non-compete clause, allowing him to set up a rival business freely. As a result, many have speculated that he will look to replicate his successes at WPP through S4, with sources telling Sky News he is expected to target some of his former employer’s assets when looking for acquisitions.