WPP today announced that it has entered into an agreement to sell 60 per cent stake of Kantar - its global data, research, consulting and analytics business - to Bain Capital. 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.$4.0 bn (c.£3.2bn).
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”).
In an official statement 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.”
Read added, “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.”
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.
Speaking on the occasion, Luca Bassi, 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.”
At the present time, the WPP companies constituting the Kantar business (Kantar Group) sit within the wider WPP group. Therefore, the Kantar Group will be carved out of the wider WPP group by way of a reorganisation and placed into a holding structure ahead of completion (Kantar Reorganisation).
“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,” said Eric Salama, CEO, Kantar.
The transaction values 100 per cent of Kantar at $4.0bn (£3.2bn approx), 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 per cent 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.
Completion (and associated proceeds) relating to a large majority of Kantar’s operations is expected in early 2020 (First Completion). 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.