By Justin George Varghese
(Reuters) - WPP (L:WPP) is in exclusive talks to sell a majority stake in its data analytics unit Kantar to private equity firm Bain Capital, it said on Monday, in a $4 billion deal aimed at steering the world's biggest advertising company back to growth.
The news puts an end to months of speculation around the heavily-contested auction which drew interest from a broad spectrum of buyout firms that are flush with cash to invest.
WPP had shortlisted a series of U.S. buyout funds to submit binding bids for a majority stake in Kantar including Apollo and Platinum, Reuters reported in May.
The auction, led by Goldman Sachs (NYSE:GS) and part of the company's efforts to raise cash, kicked off last year and also drew interest from European private equity houses CVC Capital Partners and Permira.
In a statement on Monday, WPP said Kantar was valued at $4 billion including debt. Bain's proposal was subject to negotiation and it was not certain the talks would result in a deal, the company said.
Shares of WPP closed up 2.2% at 1,012 pence on Monday after media reports reported earlier in the day that Bain emerged as the leading bidder.
Bain's interest in Kantar is the latest private equity deal to emerge in recent weeks. Blackstone (NYSE:BX) and Lego's founding family on Friday took Merlin Entertainments (L:MERL) private in a $7.5 billion deal, in one of the biggest private equity deals in Europe in recent years.
Nestle (S:NESN) also said in May it was in exclusive talks to sell its skin health business to a consortium led by EQT Partners for 10.2 billion Swiss francs ($10.33 billion).
WEIGHED DOWN
Kantar's underlying sales fell 2% last year to 2.6 billion pounds with operating profit down 14% to 301 million pounds.
The business generates about 15% of WPP's overall sales and provides brand and marketing communications research for some of the world's largest advertisers.
It has traditionally weighed on WPP's overall organic growth rates - a key measurement for the industry.
Analysts say Kantar risks losing market share to more tech-savvy peers, while its business model is challenged by consumer goods companies developing their own data teams, rather than relying on surveys undertaken by external firms.
First-quarter results in April showed the British company has been particularly hard hit in the United States, where a weak competitive performance in recent years has been compounded by the loss of work from Ford and others in 2018.
DIGITAL FOCUS
WPP, the owner of agencies including JWT and Ogilvy, is in the middle of an overhaul following several profit warnings in 2017 and 2018 and turmoil linked to founder Martin Sorrell's abrupt departure over a complaint of misconduct, which he denied.
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.
WPP's Mark Read, who took the helm of the 12-billion pound advertising giant last year, has pledged to spend 300 million pounds restructuring the group to bring it back in line with peers by the end of 2021.
Read, a soft-spoken executive who worked alongside Sorrell for decades, set out a plan in December to hire more creative staff, including around 1,000 new jobs to improve its senior leadership in its New York agencies, in a bid to return the company to growth.
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