Advertising giant WPP has agreed to sell a 60 per cent stake in data analytics arm Kantar to private equity firm Bain Capital, in a deal that values Kantar at about $4 billion and gives WPP funds for its turnaround plan.
WPP, the owner of advertising agencies including Ogilvy and Wunderman Thompson, is in the midst of an overhaul following several profit warnings and the abrupt departure of founder Martin Sorrell over a complaint of misconduct, which he denies.
WPP said proceeds from the deal, after tax and continuing investment in Kantar, were expected to be about $3.1 billion.
It will use about 60% of net proceeds to cut average net debt to the low end of a targeted range of 1.5-1.75 times core earnings for 2020. The rest of the money will be returned to shareholders, WPP said, adding the deal was subject to backing from investors and other regulatory and legal approvals.
"This transaction creates value for WPP shareholders and further simplifies our company," Chief Executive Officer Mark Read said.
"With a much stronger balance sheet and a return of approximately 8 per cent of our current market value to shareholders planned, we are making good progress with our transformation."
Company veteran Read took over as WPP's boss following last year's departure of Sorrell.
Bain's interest in Kantar is the latest private equity deal in recent weeks. Blackstone and Lego's founding family last month took Merlin Entertainments private in a $7.5 billion deal, in one of the biggest private equity transactions in Europe in recent years.
Sources familiar with the situation had told Reuters that private equity groups including CVC, Apollo and Bain had submitted preliminary bids for Kantar.
Launched by WPP in 1992, Kantar offers insights into the views of customers and consumers in over 100 countries.
WPP said the deal and use of proceeds would be marginally dilutive to headline earnings per share in 2021. The stake sale comes months after WPP said it suffered a sharp drop in first-quarter underlying sales in North America as the loss of work from clients such as Ford took a toll on its most important market. With technology transforming the way advertising is made, placed and sold, clients want WPP to better integrate its agencies so it can produce faster offerings across multiple platforms, at a cheaper cost.