WPP sells majority stake in FGS Global to Bidco Inc - An excellent outcome for WPP

Source: © The Media Leader The Media Leader In a move termed, "an excellent outcome for WPP" by Mark Read, WPP CEO, WPP will sell its entire majority stake in FGS Global

This Tansaction better positions WPP to focus on and invest in its world-class creative, media, corporate, and consumer public relations businesses to deliver growth while strengthening the Group's balance sheet.

The strategic communications and advisory firm stake will be sold to Bidco Inc., an entity controlled by investment funds managed or advised by Kohlberg Kravis Roberts & Co. L.P. (KKR)

WPP’s value realisation strategy started with the merger of Finsbury, The Glover Park Group and Hering Schuppener in 2021, the subsequent acquisition of Sard Verbinnen in 2021 and the introduction of KKR as a minority shareholder in 2023.

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An excellent outcome for WPP

The sale of FGS represents an excellent outcome for WPP says Mark Read, CEO of WPP.

“Together with the management of FGS we have built a world-leading strategic communications and advisory group, creating considerable value for all stakeholders.

“We have achieved an attractive price, enabling WPP to accelerate the crystallisation of the significant value created.

“This also provides WPP with greater financial and management flexibility as we continue to grow our core business including Burson and Ogilvy Public Relations which give our clients access to world-class public relations services."

KKR first made a minority investment in the Firm in July 2023.

Philipp Freise, Partner and Co-Head of European Private Equity at KKR, says, "Our investment in FGS reflects our strong commitment to strategic partnerships, where we provide long-term capital and global resources to entrepreneurial teams and world-class businesses.

“We strongly believe in FGS's strategy and leadership and have been pleased with our partnership since our minority investment in July 2023.

“In today's increasingly complex stakeholder ecosystems, the value of FGS's insight, advice and execution is increasingly essential for organisations to navigate uncertainty and achieve their goals. We look forward to continuing our collaboration and helping FGS realize their vision as a global category leader."

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A standalone firm

FGS has provided advice to the stakeholder economy with over 1,400 experts and over 1,600 clients globally.

Alexander Geiser, Global CEO of FGS, says, "Over the past four years, we have built one of the world's leading strategic communications and advisory businesses from three independent consultancies and the addition of Sard Verbinnen.

“I would like to thank WPP for their help and long-standing collaboration in growing our firm. We are thrilled by the continued support of KKR, who also share our vision and strategy to be the leading advisor helping clients navigate the increasingly complex stakeholder economy.

“KKR's exceptional investment track record, extensive experience and global resources will be invaluable as we further grow our integrated solutions globally as a standalone firm."

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The transaction

The consideration for the sale of WPP's c.50% stake at an Enterprise Value of $1.7bn (c.£1.3bn1) is $775m (£611m) ($707m (£557m) after tax) payable in cash at completion.

This represents an attractive valuation multiple to the 2023 EBITDA.

The total cash proceeds payable on completion of $767m (£604m) will be used to reduce WPP's leverage, implying pro-forma average net debt to EBITDA of c.1.60x.

WPP aims to continue to manage its debt within the targeted range of 1.5-1.75x average net debt to EBITDA, enabling it to invest in the growth of its businesses, pay dividends and return surplus capital to investors over time.

The Transaction has no impact on WPP's current year or medium-term guidance and is expected to be broadly earnings-neutral in 2025.

The Transaction is expected to close before the end of 2024, subject to regulatory approvals and other customary closing conditions.

The Transaction is a related party transaction, falling within UK Listing Rule 8.2.1R, due to KKR's existing c.28% shareholding in FGS. The board of WPP (the Board), which has been so advised by Goldman Sachs International, acting in its capacity as a sponsor, considers that the terms of the Transaction are fair and reasonable as far as WPP shareholders are concerned.

In giving its advice, Goldman Sachs International has taken account of the Board's commercial assessment of the Transaction. The Board considers the Transaction to be in the best interests of WPP shareholders as a whole.