The British advertising company WPP has rejected a takeover offer from the private equity group KKR for a majority stake in the financial communications firm FGS Global. This is reported by individuals with direct knowledge of the negotiations.

KKR, which already holds about 30 percent of FGS, had made an offer in recent months to increase its stake. The offer valued FGS higher than the deal last year, in which the company was valued at 1.43 billion dollars. Nevertheless, the offer was rejected by WPP as too low.

WPP, which owns about 55 percent of FGS, holds the remaining shares together with FGS's partners and employees. Although KKR might return with a higher offer, insiders describe the situation as a "price negotiation." An insider added that the WPP board does not consider FGS to be "for sale," but takes "fiduciary responsibility" into account.

Philipp Freise, Co-Head of European Private Equity at KKR, led the investment in FGS. Goldman Sachs is acting as an advisor for WPP in its transactions. WPP, KKR, and the management are working on a plan to take FGS public within the next two years.

The situation illustrates how WPP suffers from a so-called conglomerate discount. The market valuation of WPP on the London Stock Exchange, amounting to 8 billion pounds, is below the total value of its many operating companies. Along with FGS, these include the PR firm Burson and the advertising agencies GroupM and Ogilvy. WPP also holds a stake in the market research firm Kantar.

FGS Global is a strategic consulting and communications firm with nearly 30 offices worldwide and more than 1,600 clients. The company was formed through the merger of WPP-controlled firms Finsbury from London, Hering Schuppener from Frankfurt, and the U.S.-based Glover Park Group. Later, Sard Verbinnen was acquired. According to insiders, FGS generated a revenue of approximately 450 million dollars and an EBITDA of over 90 million dollars last year.

The discussions about FGS are taking place against the backdrop of a series of private equity-backed takeovers in the communications and PR sector. Tulchan Communications was sold to Teneo, while Powerscourt went to Morrow Sodali, which is backed by TPG. Additionally, PPHC, a bipartisan American public affairs group, acquired the London communications firm Pagefield.

WPP owns a number of other global communication firms. Earlier this year, the company merged BCW and Hill & Knowlton into a new firm called Burson, led by Corey duBrowa, former chief of communications at Google. Additionally, WPP operates a PR business through its advertising agency Ogilvy.