Investment by Bain Capital Private Equity
values Kantar at c.$4.0bn; WPP leverage target to be met a year
ahead of plan; c.£1.0bn shareholder return planned
WPP (NYSE: WPP) is today announcing that it has entered into an
agreement to sell 60% of Kantar, its global data, research,
consulting and analytics business, to Bain Capital (the
“Proposed Transaction”). The Proposed Transaction creates a
strong partnership for the development and growth of Kantar and
values the whole of Kantar at a headline enterprise value of
c.$4.0bn (c.£3.2bn).
Transaction highlights
- Bain Capital Private Equity’s (“Bain Capital”)
acquisition of 60% of Kantar creates a strong partnership with WPP
to accelerate the development of Kantar
- Further simplifies and repositions WPP for growth, whilst
unlocking significant value for shareholders
- Kantar valued at c.$4.0bn (c.£3.2bn1) in the proposed
transaction, equivalent to a multiple of 8.2x 2018 Kantar headline
EBITDA2
- Proceeds to WPP on completion after tax and continuing
investment in Kantar expected to be c.$3.1bn (c.£2.5bn)
- Potential value upside for WPP shareholders from 40% equity
stake in Kantar
- WPP to retain c.60% of net proceeds to reduce debt to the low
end of the target leverage range of 1.5 – 1.75x average net
debt/EBITDA3 for 2020
- Balance of proceeds, c.$1.2bn (c.£1.0bn), to be returned to
shareholders
- Impact of proposed transaction and use of proceeds expected to
be marginally dilutive to headline EPS in 2021
- Completion and associated proceeds relating to no less than 86%
of Kantar expected in early 2020, subject to approval by WPP
shareholders and other customary regulatory and legal
approvals
Mark Read, Chief Executive Officer, WPP, said:
“Kantar is a great business and we look forward to working with
Bain Capital to unlock its full potential. As a strategic partner
and shareholder in Kantar, WPP will continue to benefit from its
future growth while our clients continue to benefit from its
services and capabilities. I would like to thank Eric Salama, his
team and everyone at Kantar for their tremendous contribution to
WPP – a contribution that will continue as we develop the business
together.
“This transaction creates value for WPP shareholders and further
simplifies our company. With a much stronger balance sheet and a
return of approximately 8% of our current market value to
shareholders planned, we are making good progress with our
transformation.”
Luca Bassi, a Managing Director at Bain Capital Private
Equity, said:
“Kantar is a market leader in many areas and we are excited to
be partnering with its management team and WPP to build on this
remarkable platform for growth. We see many opportunities for
expansion and will invest in technology to expand the company’s
capabilities and reinforce its global leading position.”
Christophe Jacobs van Merlen, a Managing Director at Bain
Capital Private Equity, said:
“We believe that we are well-positioned to support Kantar,
alongside WPP, in driving forward the business in a rapidly
changing industry. Our deep sector knowledge, operational expertise
and strong track record of partnering with management teams to
accelerate growth gives us confidence that we can help Kantar grow
both organically and by acquisition.”
Eric Salama, CEO, Kantar, said:
“Our new ownership structure presents a great opportunity for
Kantar, our employees and our clients. In Bain Capital we have a
partner who shares our ambition, brings relevant expertise and –
with WPP – can help us accelerate our growth and impact for
clients. We are focused on delivering ‘human understanding at scale
and speed’ and the ‘best of Kantar’ more consistently. We will do
so by investing more in talent and by becoming a more
technology-driven solutions provider.”
Background to and reasons for the Proposed
Transaction
On 25 October 2018, WPP highlighted the significant opportunity
to develop Kantar into the world’s leading data, insights and
consulting company. The Board considered that the best way to
unlock Kantar’s potential and maximise shareholder value was with a
strategic or financial partner. It was envisaged that WPP would
remain a share owner with strategic links to ensure that the
benefits to clients were realised.
Kantar has attracted significant levels of interest from
potential financial partners, leading to the agreement today with
Bain Capital. The WPP Board believes that the Proposed Transaction
will allow Kantar to strengthen its industry-leading position
through the combined expertise and resources of Bain Capital and
WPP. It also crystallises significant value for WPP’s shareholders,
while giving them continued exposure to an attractive business with
the potential for further value realisation in the future.
Principal terms of the Proposed Transaction
The transaction values 100% of Kantar at c.$4.0bn (c.£3.2bn),
equivalent to a calendar 2018 EV/EBITDA multiple of 8.2x based on
Kantar’s headline EBITDA (excluding WPP overhead) of £386m. The
equity value after expected completion adjustments is c.$3.7bn
(c.£3.0bn). After transaction costs, tax and WPP’s continuing
investment of c.$0.4bn to own 40% of the equity in Kantar, net cash
proceeds to WPP are expected to be c.$3.1bn (c.£2.5bn). The
consideration is payable in cash. WPP may receive additional
consideration over the next three years in respect of certain
contingent liabilities, in the event that such liabilities are
lower than estimated. Additionally, WPP may receive certain other
payments during the life of its partnership with Bain Capital. The
amounts of these payments are dependent on future events and
outcomes which are too uncertain to allow meaningful estimation
today. Under no circumstances can such contingent liabilities,
events and outcomes lead to any reduction or repayment of the
consideration to be received by WPP on completion.
At the present time, the WPP companies constituting the Kantar
business (the “Kantar Group”) sit within the wider WPP
group. The Kantar Group will therefore be carved out of the wider
WPP group by way of a reorganisation and placed into a holding
structure ahead of completion (the “Kantar Reorganisation”).
It is expected that completion will take place in a number of
stages. The consideration is subject to adjustment on each
completion to take into account any movements in net debt between
the Kantar Group and the WPP Group arising as a result of the
Kantar Reorganisation.
Completion (and associated proceeds) relating to a large
majority of Kantar’s operations is expected in early 2020
(“First Completion”) and is conditional on the satisfaction
(or waiver, where applicable) of the following conditions:
- the approval of WPP’s shareholders (the Proposed Transaction is
a Class 1 transaction for WPP under the Listing Rules);
- obtaining antitrust approvals for the Proposed Transaction from
regulators in the European Union, the United States, Brazil, China,
Russia, Turkey, South Korea, South Africa and Mexico; and
- completion of such proportion of the Kantar Reorganisation such
that prior to First Completion, WPP is in a position to complete on
the sale of Kantar entities representing not less than 90% of the
total FY18 EBITDA of the Kantar business. WPP may waive this
threshold down to 86% of the total FY18 EBITDA of the Kantar
business.
The Proposed Transaction will not proceed if the conditions
above are not satisfied (or waived, where applicable) on or before
the date which is seven months from the date of this announcement,
with WPP having the right to extend this period to nine months if
certain conditions have not yet been satisfied. Completion for the
remainder of Kantar’s operations is expected to occur within 12
months of the date of this announcement.
As part of the Proposed Transaction, WPP has agreed the terms of
transitional services agreements which will govern the provision of
IT services and other operational services between WPP and Kantar
for a transitional period after First Completion.
A shareholders’ agreement will be put in place, effective from
First Completion, in order to govern the relationship between WPP
and Bain Capital, and will ensure consistent governance rights for
the parties. Eric Salama will remain as CEO of Kantar and Robert
Bowtell as CFO. The boards of the Kantar joint venture companies
formed by WPP and Bain Capital will have up to six Bain Capital
nominated directors and up to two WPP nominated directors.
In certain circumstances, in the event of a disposal by Bain
Capital of a majority of its interest in Kantar to a third party,
it will have the right to require WPP also to transfer all of its
securities in Kantar to that third party at the same price.
Further details of the Proposed Transaction will be provided in
a circular which, together with a notice to convene a general
meeting, will be sent to WPP shareholders in due course.
Use of proceeds
WPP intends to retain c.60% of net proceeds to reduce its
leverage. On completion, leverage is expected to be at the low end
of WPP’s target range of 1.5 – 1.75x average net debt/EBITDA for
2020, a year ahead of the target date. The Board believes that the
strengthened balance sheet is appropriate at this stage of WPP’s
transformation and given the structural changes the industry is
undergoing.
The balance of net proceeds, c.$1.2bn (c.£1.0bn), will be
returned to shareholders. The form of this return will be
communicated to shareholders in due course. The impact of the
Proposed Transaction and the use of proceeds is expected to be mid
single digits % dilutive to headline earnings per share in 2020 and
marginally dilutive to headline earnings per share in 2021.
WPP’s dividend policy will remain unchanged as a result of the
transaction.
Information on Kantar
Kantar is an industry-leading data, research, consulting and
analytics business which offers insights into the views of
customers and consumers in over 100 countries. WPP launched Kantar
in 1992 by consolidating its existing market research businesses,
and has added significantly to its reach and capabilities since
then through a combination of acquisitions, partnerships and
internal product development.
The financial performance of Kantar for the 2018 financial year
(excluding the allocation of head office costs) is set out
below.
£m
Revenue
2,560.6
Revenue less pass-through costs
1,958.4
Headline EBITDA
386.0
Headline PBIT
330.4
Reported PBIT
221.2
Reported PBT
219.3
The gross assets of Kantar at 31 December 2018, excluding
intercompany receivables, were £4,553.1m.
The figures presented have been derived from the consolidation
schedules used to compile the audited consolidated financial
statements of WPP plc and its subsidiaries (the “WPP
Group”). Kantar does not constitute a legal group in itself and
the ownership structure is mixed within the wider WPP Group. Legal
parents and subsidiaries have been excluded where they do not form
part of the Kantar disposal group. These figures represent Kantar’s
contribution to the WPP Group’s results and assets and include
goodwill and intangibles that have arisen from the WPP Group’s
acquisitions of these companies, along with any associated
amortisation or impairment. All inter-group balances and revenue
have been eliminated, but cost allocations and other transactions
between the Kantar disposal group and other WPP Group companies
remain where the underlying transaction is expected to continue
after the disposal. WPP head office costs have not been allocated
where they will not be transferred with the Kantar disposal
group.
Investor and analyst call
The management of WPP will host a conference call at 8.30am
(BST) today to discuss the announcement. Slides will be available
at https://www.wpp.com/investors/ from 8.00am and the dial-in
details for the call are as follows:
United Kingdom and International +44 20 7192 8000
United States +1 631 510 7495
Confirmation code 8986777
Bain Capital was advised by Canson Capital Partners, Credit
Suisse and Mediobanca.
Goldman Sachs International, which is authorised by the
Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority in the
United Kingdom, is acting exclusively for WPP and no one else in
connection with the matters referred to in this announcement and
will not be responsible to anyone other than WPP for providing the
protections afforded to clients of Goldman Sachs International, or
for providing advice in connection with the contents of this
announcement or any other matter referred to herein.
Ardea Partners UK LLP (“Ardea”) has provided financial
advice to WPP and no one else in connection with certain of the
matters described in this announcement and will not be responsible
to anyone other than WPP for providing the protections afforded to
clients of Ardea nor for providing advice in connection with the
matters referred to herein. Neither Ardea nor any of its affiliates
owes or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, whether in contract, in tort, under
statute or otherwise) to any person who is not a client of Ardea in
connection with the matters described in this announcement, any
statement contained herein or otherwise.
Merrill Lynch International (“BofA Merrill Lynch”), a
subsidiary of Bank of America Corporation, is acting exclusively
for WPP in connection with the Proposed Transaction and for no one
else and will not be responsible to anyone other than WPP for
providing the protections afforded to its clients or for providing
advice in relation to the transaction.
Lazard Freres & Co. LLC (“Lazard”) has provided
financial advice to WPP and no one else in connection with certain
of the matters described in this announcement and will not be
responsible to anyone other than WPP for providing the protections
afforded to clients of Lazard nor for providing advice in
connection with the matters referred to herein. Neither Lazard nor
any of its affiliates owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is
not a client of Lazard in connection with the matters described in
this announcement, any statement contained herein or otherwise.
Important notices
This announcement contains statements which are, or may be
deemed to be, “forward-looking statements” which are prospective in
nature. All statements other than statements of historical fact are
forward-looking statements. Often, but not always, forward-looking
statements can be identified by the use of forward-looking words
such as “plans”, “expects”, “is expected”, “is subject to”,
“budget”, “scheduled”, “estimates”, “forecasts”, “intends”,
“anticipates”, “believes”, “targets”, “aims”, “projects” or words
or terms of similar substance or the negative thereof, as well as
variations of such words or phrases or statements that certain
actions, events or results “may”, “could”, “should”, “would”,
“might” or “will” be taken, occur or be achieved. Such statements
are qualified in their entirety by the inherent risks and
uncertainties surrounding future expectations. Forward-looking
statements include statements relating to (a) future capital
expenditures, expenses, revenues, earnings, economic performance,
indebtedness, financial condition, dividend policy, losses and
future prospects, (b) business and management strategies and the
expansion and growth of WPP’s operations, and (c) the effects of
global economic conditions on WPP’s business.
Such forward-looking statements involve known and unknown risks
and uncertainties that could significantly affect expected results
and are based on certain key assumptions. Many factors may cause
actual results, performance or achievements of WPP to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Important
factors that could cause actual results, performance or
achievements of WPP to differ materially from the expectations of
WPP, include, among other things, general business and economic
conditions globally, industry trends, competition, changes in
government and other regulation and policy, including in relation
to the environment, health and safety and taxation, labour
relations and work stoppages, interest rates and currency
fluctuations, changes in its business strategy, political and
economic uncertainty and other factors. Such forward-looking
statements should therefore be construed in light of such factors.
Neither WPP nor any of its directors, officers or advisers provides
any representation, assurance or guarantee that the occurrence of
the events expressed or implied in any forward-looking statements
in this announcement will actually occur. You are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date hereof. Other than in accordance with its
legal or regulatory obligations (including under the UK Listing
Rules and the Disclosure and Transparency Rules), WPP is not under
any obligation and WPP expressly disclaims (to the maximum extent
permitted by law) any intention or obligation to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise.
No statement in this announcement is intended as a profit
forecast or estimate for any period and no statement in this
announcement should be interpreted to mean that earnings, earnings
per share or income, cash flow from operations or free cash flow
for WPP or the WPP group post-transaction for the current or future
financial years would necessarily match or exceed the historical
published earnings, earnings per share or income, cash flow from
operations or free cash flow for WPP.
This announcement is not intended to, and does not constitute,
or form part of, any offer to sell or an invitation to purchase or
subscribe for any securities or a solicitation of any vote or
approval in any jurisdiction. WPP shareholders are advised to read
carefully the formal documentation in relation to the Proposed
Transaction once it has been despatched. Any response to the
Proposed Transaction should be only on the basis of the information
in the formal documentation to follow.
This announcement is being distributed to all owners of Ordinary
shares and American Depository Receipts. Copies are available to
the public at the Company’s registered office.
1All $ values are translated into £ at an exchange rate of
£1:$1.25
2 Profit before finance income/costs and revaluation of
financial instruments, taxation, investment gains/losses and
write-downs, goodwill impairment and other goodwill write-downs,
amortisation and impairment of intangible assets, share of
exceptional losses/gains of associates, depreciation of property,
plant and equipment, losses/gains on remeasurement of equity
interests arising from a change in scope of ownership,
restructuring and transformation costs and allocation of corporate
overhead
3 Net debt/EBITDA ratio calculated excluding impact of IFRS 16:
Leases
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version on businesswire.com: https://www.businesswire.com/news/home/20190712005117/en/
For more information please contact: For WPP
Investors and analysts: Peregrine Riviere +44 7909 907193
Lisa Hau +44 7824 496015 Fran Butera (US) +1 914 484 1198
Media: Chris Wade +44 20 7282 4600 Kevin McCormack (US)
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+44 20 7466 5000 Buchanan Communications +44 7710 130 634
Goldman Sachs International: Anthony Gutman Devin Wilde
+44 20 7774 1000
Ardea Partners: James Del Favero Will Skolnik +44 20 3848
8700
BofA Merrill Lynch: Ian Ferguson Richard Abel +44 20 7628
1000
Lazard: Richard Hoyle +1 212 632 6570
For Bain Capital Hazel Stevenson +44 20 3757 4989 Ed
Gascoigne-Pees +44 20 3757 4984 Camarco
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