Australia’s largest agency holding group, STW Communications, is now in talks of a merger with Martin Sorrell's WPP. The deal will proceed with WPP owning as much as 61 per cent in the company.

STW halted its trading last Friday when Mumbrella reported on the negotiations. The company now confirms the deal. For years, the takeover bid made headlines but remained unexpected. Since the late 1990s, both companies have worked closely together. They have also been partners in firms like Oglivy.

Before the merger's announcement on Monday, WPP had a 23 per cent stake in STW, making it the largest shareholder. Merging STW with WPPS' Australia and New Zealand operations will allow the business to earn as much as $847 million in annual revenue including combined earnings of $142 million before interest and tax.

"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," Sydney Morning Herald quoted Sorrell in a statement.

"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."

The merger will put STW's value at $512. The shares issued will also be at 91.5 cents each. This is 30 per cent more than what the company was trading for before Friday's trading halt. STW also emphasised that the deal will not lead to job losses; rather, the partnership will look for efficiencies valued at $15 million annually via shared services.

The companies also expect to employ around 5,500 in light of the deal. STW owns several companies, wholly or in part, including The Brand Agency and Tongue, the White Agency and Bohemia.

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