Martin Sorrell's WPP has sealed a merger deal with Australian-listed STW Communications to create a new local advertising, media and marketing services firm worth more than $1 billion.
The new combined entity will see WPP's local media businesses, such as MediaCom, GPY&R and MEC merge with those of STW. The combined venture will house around 75 businesses.
STW will issue new shares to WPP at 91.5Â¢ per share, a 26.2 per cent premium to where the shares closed on   December 10, prior to the company requesting a trading halt. 
STW shares finished Monday up 1.4 per cent at 73.5Â¢.
STW will acquire WPP's local business to form the new entity, which will be 61 per cent owned by WPP. The new business will remain listed on the Australian Securities Exchange and will change its name following shareholder approval.
STW chief executive Mike Connaghan said the deal will be earnings accretive from day one, and estimated there could be synergies of $15 million per year. He said he did not expect any problems with getting the deal past the Australian Competition and Consumer Commission.
"We absolutely don't think that there will [be any competition issues]. We will be big, but the Australian market is very competitive, all the big international holding companies are here at scale and there's a thriving local ad industry and a local start-up of digital businesses all over the place.
Mr Connaghan said the synergies would not be found with job cuts, rather they would look at back office duplication such as insurance, audit costs, research, IT, property and travel.
The deal has been a long time coming, with the two companies partnering in a number of businesses since 1998 when they formed Singleton, Ogilvy and Mather, and WPP, prior to the deal, was STW's largest shareholder with 23.6 per cent held by a subsidiary; Cavendish Square.
"They've been our natural partner for some time. Over that time we've had lots of good years and lots of bad years and I think we've got momentum on our side now," Mr Connaghan said.
The combination of WPP's Australia and New Zealand operations with STW creates a business with annual revenue of $847 million and with a combined $142 million in earnings before interest and tax.
Mr Connaghan said that WPP approached STW earlier in 2015 about bringing the two businesses closer together. "Bringing the two together, to me, always made a lot of sense, it was just making sure we could get a sensible deal done," he said.
"WPP were very keen to have their businesses involved in the transaction so they could get to a place where they have local management of all the assets of WPP and STW and that's my new job with the new company."
Sir Martin said Australia and New Zealand was the fifth largest market for WPP, after the United States, 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."
Mr Connaghan will lead the new business, which will have 11 directors on the board, six of whom will be WPP appointees.