Marketing and communications groups STW and WPP have announced a merger, with WPP becoming the majority shareholder with 61 per cent. The merger now sees the combined business in Australia and New Zealand valued at $512 million.

The announcement was made via the Australian Securities Exchange (ASX) this morning.

The merger follows STW’s announcement last week it was halting its trading pending an announcement, with many in the market speculating it would be Martin Sorrell’s WPP to take ownership.

Many of STW’s brands already overlap with WPP’s global brands, such as Tongue, DT, Designworks and others.

The merger will see STW become the primary vehicle for WPP in Australia and New Zealand.

The current CEO of STW Michael Connaghan (pictured above) will continue to lead STW, with chairman Robert Mactier continuing on as chairman.

In the ASX announcement, the rationale behind the transaction said it aimed to increase the knowledge and offerings from the network to its clients.

Chairman Mactier said in the release the bringing together of STW and WPP will “unlock tremendous local and global capability, experience and efficiencies for our clients as well as establishing a fantastic platform for our people to prosper”.

“I consider this a genuine win-win transaction for all our stakeholders. Post completion, we look forward to working seamlessly with WPP as our major shareholder and strategic partner as we embark on the exciting journey that is in front of us.”

STW’s CEO Connaghan added in the ASX statement: “WPP has been a fantastic partner since we came together to create Singleton Ogilvy and Mather in 1998. Since then we have had great success in Australia and New Zealand partnering in J Walter Thompson, Added Value, Mindshare and Maxus. I believe this deal makes great sense. To finally align our shareholdings in those exciting partnerships and now to expand our relationship across the full STW and WPP Australia and New Zealand portfolio of companies is an amazing opportunity.

“WPP is the leading player on the global stage in our industry. We have the potential to create a group unparalleled in this part of the world, totally focused on our home markets, but allowing our clients and people open access to best thinking on a global level.”

Sir Martin Sorrell, CEO of WPP said in the statement: “Australia and New Zealand is our fifth largest market after the United States, the United Kingdom, Greater China and Germany. The merger of our Australian and New Zealand operations with STW will give us a unique opportunity to offer our local and international clients a comprehensive set of services and to make sure we can offer the best talent through country management. It will also enable STW to focus on the Australian and New Zealand markets, which it knows best, with a structure that will strongly incentivise its people.”

STW’s net profit dropped 22.5 per cent during the first half of this year, a result Connaghan called “disappointing”.

Read more about the half year results here.