WPP edges closer to offloading Kantar, confirming ‘exclusive discussions’ with Bain
WPP has confirmed it is in in “exclusive discussions” with Bain Capital for the sale of its majority stake in Kantar, valued at around $4bn.
Kantar
The company confirmed it had entered discussions with the private equity firm today (1 July) following reports it was looking to cap an auction for the business by the end of the week.
In a statement, WPP caveated that the proposal is still subject to negotiation.
“There is no certainty that these discussions will result in a transaction involving Kantar,” a company spokesperson said.
Mark Read, chief executive of WPP, has previously stated his intent to hold onto 25-40% of the company.
Meanwhile Kantar chief executive Eric Salama confirmed to The Drum that discussions to sell the rest of its majority stake were being entirely held with private equity companies, and not “any strategic buyers”, such as Accenture or Nielson.
Last month (19 June), Salama described the frontrunner for the business as “people who share an ambition for growth – they want to grow Kantar and scale it and they want to make it a much more tech-driven business in every aspect.".
It is unclear if said frontrunner has changed over the past two weeks.
The company first confirmed it would sell the data and insights firm last October.
The news comes the same day as WPP confirmed plans to offload its 25% stake in Chime Communications to the network’s majority shareholder, Providence Equity Partners, for a deal worth £54.4m.
The deals are set to substantially lighten the holding company’s debt, which currently stands at £4bn ($5.1bn). The arrears follow in the wake of Sir Martin Sorrell’s company-building acquisition spree, which current chief executive Mark Read is slowly consolidating to create a more streamlined, investor-friendly business.
The Financial Times estimates the company has divested £900m ($1.1bn) in international business since Sorrell’s departure in April 2018.
The analyst's view – Alex DeGroote, DeGroote Consulting
The news around likely Chime and Kantar disposal proceeds is highly significant for WPP. Since Mark Read became chief executive a year ago, the group has been in divestment mode, selling off the family silver. Last year WPP raised £850m in asset disposals. The sale of the majority stake in Kantar alone should now raise another £3bn. Chime will be tiny in comparison, but it is still an iconic WPP shareholding.
WPP had £4.2bn net debt at Q1 19 period end. Post Kantar this should now fall materially. The group balance sheet is no longer a worry, which will reassure shareholders. Mark Read can focus more clearly on turning round group operating performance in US, which has been a serious drag for years.
The valuation on Kantar - if reports are to be believed - is surprisingly high. Investors will be delighted. Why? Kantar, a market research conglomerate, has no track record of meaningful growth and will need a major revamp under new private equity owners.
Mark Read is executing on the WPP turnaround story in a quiet but impressive fashion. If group organic revenue growth can now be restored, WPP will be properly back in business.