TIDMWPP
RNS Number : 3514F
WPP PLC
12 July 2019
FOR IMMEDIATE RELEASE 12 July 2019
WPP PLC ("WPP")
Proposed sale of 60% of Kantar
Investment by Bain Capital Private Equity values Kantar at
c.$4.0bn; WPP leverage target to be met a year ahead of plan;
c.GBP1.0bn shareholder return planned
Transaction highlights
n Bain Capital Private Equity's ("Bain Capital") acquisition of
60% of Kantar creates a strong partnership with WPP to accelerate
the development of Kantar
n Further simplifies and repositions WPP for growth, whilst
unlocking significant value for shareholders
n Kantar valued at c.$4.0bn (c.GBP3.2bn(1) ) in the proposed
transaction, equivalent to a multiple of 8.2x 2018 Kantar headline
EBITDA(2)
n Proceeds to WPP on completion after tax and continuing
investment in Kantar expected to be c.$3.1bn (c.GBP2.5bn)
n Potential value upside for WPP shareholders from 40% equity
stake in Kantar
n 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/EBITDA(3) for 2020
n Balance of proceeds, c.$1.2bn (c.GBP1.0bn), to be returned to
shareholders
n Impact of proposed transaction and use of proceeds expected to
be marginally dilutive to headline EPS in 2021
n 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."
(1) All $ values are translated into GBP at an exchange rate of
GBP1:$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
Introduction
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.GBP3.2bn).
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.GBP3.2bn),
equivalent to a calendar 2018 EV/EBITDA multiple of 8.2x based on
Kantar's headline EBITDA (excluding WPP overhead) of GBP386m. The
equity value after expected completion adjustments is c.$3.7bn
(c.GBP3.0bn). 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.GBP2.5bn). 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.GBP1.0bn), 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.
GBPm
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 GBP4,553.1m.
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
This announcement contains inside information. The person
responsible for arranging the release of this announcement on
behalf of WPP is Marie Capes, Company Secretary.
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) +1 212 632 2239
Juliana Yeh (Asia) +852 2280 3790
Richard Oldworth, +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
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCMMGMNVZDGLZG
(END) Dow Jones Newswires
July 12, 2019 02:16 ET (06:16 GMT)
Wpp (LSE:WPP)
Historical Stock Chart
From Apr 2024 to May 2024
Wpp (LSE:WPP)
Historical Stock Chart
From May 2023 to May 2024