Mumbai: WPP has entered into an agreement to sell its entire majority stake in strategic communications and advisory firm, FGS Global to Kite Bidco. This is an entity controlled by investment funds managed or advised by Kohlberg Kravis Roberts & Co (KKR). KKR first made a minority investment in the firm in July 2023.
The transaction accelerates the value realisation for WPP from its strategic advisory businesses. This 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. Through these transactions, FGS has become a global leader in providing advice to the stakeholder economy with over 1,400 experts and over 1,600 clients.
This Transaction WPP said better positions it to focus on and invest in its world-class creative, media and corporate and consumer public relations businesses to deliver growth while strengthening the Group’s balance sheet.
The consideration for the sale of WPP’s c.50% stake at an Enterprise Value of $1.7 billion (c.£1.3 billion) is $775 million (£611 millio) ($707 millio (£557 million) after tax) payable in cash at completion. This represents a valuation multiple to the 2023 EBITDA.
The total cash proceeds payable on completion of $767 million (£604 million) will be used to reduce WPP’s leverage, implying pro-forma average net debt to EBITDA of c.1.60x. WPP added that it 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 board of WPP which has been so advised by Goldman Sachs International, acting in its capacity as 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 said that it considers the transaction to be in the best interests of WPP shareholders as a whole.
Mark Read, CEO WPP said, “The sale of FGS represents an excellent outcome for 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.”
Alexander Geiser, global CEO FGS said, “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.”
Philipp Freise, partner and co-head European Private Equity KKR, stated, “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 realise their vision as a global category leader.”
