WPP 'considering MediaMonks bid since November'

WPP Group has been working on a takeover of the digital agency MediaMonks since last November, according to lawyers for the FTSE-100 company who claim that a rival bid led by Sir Martin Sorrell is "unlawful".

Sky News has learnt that WPP (Frankfurt: A1J2BZ - news) has told its former chief executive, who quit the company in April after more than three decades, that his current negotiations to buy MediaMonks amounted to "an unlawful diversion of a maturing business opportunity for WPP".

In its letter to Sir Martin, which also threatened to strip him of share awards potentially worth £20m, the company said he had been "heavily engaged" in WPP's evaluation of a bid for the Dutch agency prior to his departure, and that his "involvement extended to meeting with the MediaMonks management team in the Netherlands and WPP executives… to understand the value of MediaMonks as an acquisition for WPP".

Lewis Silkin, the law firm acting for Sir Martin, is understood to have responded to WPP by disputing those claims and asking it to provide details of the alleged meetings and internal discussions relating to MediaMonks.

One source close to the former WPP chief said that he had been "connected" to the idea of a potential bid for the digital agency by Inflexion, a London-based private equity firm, after he stepped down from the FTSE-100 marketing services giant.

Andrew Scott and Mark Read, who were asked to run WPP after their former boss's departure, were informed by Sir Martin in April about his discussions with MediaMonks, the source added.

The further details from their escalating legal dispute have emerged as the auction of MediaMonks enters its final stages.

Sir Martin's new vehicle, S4 Capital, has lined up funding from a consortium of City investors to acquire the company, with its management team expected to be paid in a mixture of cash and S4 shares.

Sir Martin's investors are said to be unfazed by the legal row and have committed funding to the deal.

WPP, which is said to have withdrawn from at least one potential acquisition commitment since Sir Martin's departure, has submitted a rival offer for MediaMonks.

Their competing bids for the asset explode any semblance of a truce between the company behind giant advertising names such as J Walter Thompson and Ogilvy, and the man who in running it became the longest-serving CEO in the FTSE-100.

A source close to Sir Martin's vehicle told Sky News earlier this week that WPP's legal move was "a feeble attempt to destabilise its bid" for MediaMonks, which counts Audi (IOB: 0FG8.IL - news) and Lego among its clients.

The absence of a non-compete agreement in Sir Martin's final WPP contract had already touched a raw nerve among the company's investors, and threatened to become a flashpoint after he quit the company following a probe into allegations about his behaviour.

He had, nevertheless, given a series of confidentiality undertakings, which WPP now alleges he could be in breach of.

On Wednesday, S4 published documents disclosing that Sir Martin is seeking the ability to raise up to £1bn for a takeover spree that could ultimately re-establish him at the helm of a sizeable international marketing services empire.

News of the row emerged less than a fortnight after Sir Martin told an audience at the Cannes Lions advertising festival that he would not be in direct competition with his former employer.

"I've referred to it being a peanut," he said.

"Although it does occur to me that some people have peanut allergies."

One friend of Sir Martin said the scale of his ambition meant that S4 "looked increasingly like a coconut".

Sir Martin left WPP following an investigation into allegations relating to the use of company funds to pay for a sex worker - which he has vociferously denied.

He remains a significant shareholder in WPP, with much of his wealth tied up in the stock of the company he took from a manufacturer of shopping baskets in 1985 to bestriding the global advertising industry.

When he stepped down in April, WPP was valued by the stock market at more than £16bn.

Its shares have slipped in recent months, however, amid investor anxiety about the impact of marketing budget cuts and shifts at major global advertisers.

Sir Martin's progress is being closely watched by the world's biggest marketing services agencies, which are being forced to adapt to a fast-changing media landscape in which Facebook (NasdaqGS: FB - news) and Google have emerged as powerful challengers to traditional advertising media.

Sir Martin has committed £40m of his own money to the new venture, with institutional investors such as Lombard Odier, Miton, Schroders (Frankfurt: 929969 - news) and Toscafund all backing the vehicle

Spokesmen for WPP and Sir Martin declined to comment.