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Advertising giant WPP has confirmed the sale of a 60% majority stake in its Kantar business to Bain Capital. Kantar, valued at over £3 billion, contains WPP’s health, media and consulting practices and was put up for sale at the turn of the year.
WPP has been struggling with the dramatic shrinkage of its market share for some time. The advertising companies in the group have competition from the online marketing opportunities that parties like Facebook and Amazon offer, while Accenture Interactive has rapidly carved itself a huge portion of the creative sector by way of a huge acquisition drive. 2018 marked an especially poor chapter in WPP’s recent history, however, after the company was rocked by its long-standing Chief Executive Officer Martin Sorrel being forced from the company following allegations of bullying and sexism, and financial misconduct surfaced.
In the fallout of the Sorrell saga, WPP has been consistently looking to improve its balance sheet, which has been plagued by poor health over several quarters. To that end, WPP began reviewing its ownership of Kantar, the wing of the firm which contains its health, media and consulting practices. Following a vote by the board of WPP, the group explored the possibility of a sale with the potential for an external partner with WPP to remain as a shareholder, while retiring all of Kantar’s individual brands to showcase a more unified entity.
Interestingly, one of Kantar’s potential suitors is reportedly none other than its former CEO. The disgraced business magnate bounced back onto the advertising scene with his newest venture, S4 Capital. Sorrell’s company’s acquisition of MediaMonks, followed shortly by MightyHive signalled his Sorrell’s intent, and he suggested to industry news portal The Drum that he would be interested in buying “parts of [Kantar]… but not the whole.”
Ultimately, Kantar’s consolidation showed that WPP would ultimately prefer not to chop up the research firm’s portfolio for buyers, though. Instead the news has since emerged that the advertising company has offloaded 60% of its shares to Bain Capital, which fended off three of the largest private equity companies in the world to take control of Kantar. With Kantar valued at around $4 billion (£3.19 billion), Blackstone, Carlyle and Advent International withdrew from the auction for the stake as they did not trust Kantar's business model and found the price that WPP expected to be too high.
Pending the deal’s completion, Bain Capital, the US private equity company founded by the same man as consulting firm Bain & Company, will take up a majority stake in Kantar with an offer expected to yield $3.1 billion (£2.47 billion) to WPP. WPP said it will use about 60% of the proceeds from the sale to cut its net debt to the low end of a targeted range of 1.5 - 1.75 times core earnings for 2020. The sale is expected to go through in early 2020, subjected to approval from WPP's shareholders and government regulators.
Mark Read, CEO of WPP, said of the news, “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.”
