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FOR IMMEDIATE
RELEASE
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7 August 2024
|
WPP plc ("WPP" or the
"Group")
WPP to sell
its majority stake in FGS Global at an Enterprise Value of $1.7bn,
unlocking significant value for its shareholders
WPP plc (LSE/NYSE: WPP) today
announces it has entered into an agreement to sell its entire
majority stake in leading strategic communications and advisory
firm, FGS Global ("FGS" or the "Firm"), to Kite Bidco Inc., an
entity controlled by investment funds managed or advised by
Kohlberg Kravis Roberts & Co. L.P. ("KKR") (the "Transaction").
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 better positions
WPP 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 $1.7bn
(c.£1.3bn1) is $775m (£611m) ($707m (£557m) after tax)
payable in cash at completion2. This represents an
attractive valuation multiple to the 2023 EBITDA.
The total cash proceeds payable on
completion of $767m (£604m)3 will be used to reduce
WPP's leverage, implying pro-forma average net debt to EBITDA of
c.1.60x4. 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 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.
Mark Read, CEO of 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 of FGS,
added, "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
of European Private Equity at 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 organizations 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."
1 $
enterprise value and consideration translated into £ at an exchange
rate of £1:$1.27
2 Assuming a 30 November 2024 completion date; exact proceeds
will vary slightly with completion date
3 Comprising
£557m consideration (after tax) for WPP's c.50% stake as well as a
net £47m inflow for the repayment of a loan made by WPP to FGS,
less FGS's cash on balance sheet
4 Pro-forma average adjusted net debt to headline EBITDA (last
12 months) (including depreciation of right-of-use assets) of
c.1.60x, versus WPP's average adjusted net debt to headline EBITDA
(last 12 months) (including depreciation of right-of-use assets) of
c.1.84x at 30 June 2024. Calculated by reducing WPP's average
adjusted net debt over the last twelve months by the expected cash
proceeds after tax of c.£604m and reducing headline EBITDA by FGS's
headline EBITDA contribution.
About WPP:
WPP is the creative transformation
company. We use the power of creativity to build better futures for
our people, planet, clients and communities. For more information,
visit www.wpp.com.
About FGS:
FGS Global is the world's leading
strategic communications and advisory firm, with approximately
1,400 professionals around the world, advising clients in
navigating complex stakeholder situations and reputational
challenges. FGS Global was formed from the combination of Finsbury,
The Glover Park Group, Hering Schuppener and Sard Verbinnen &
Co to offer board-level and c-suite counsel in all aspects of
strategic communications - including corporate reputation, crisis
management and government affairs - and is also the leading force
in financial communications worldwide.
FGS Global offers seamless and
integrated support with offices in the following locations: Abu
Dhabi, Amsterdam, Beijing, Berlin, Boston, Brussels, Calgary,
Chicago, Dubai, Dublin, Düsseldorf, Frankfurt, Hong Kong, Houston,
Kingston, London, Los Angeles, Munich, Paris, Riyadh, San
Francisco, Shanghai, Singapore, Tokyo, Toronto, Washington, D.C.,
South Florida, Vancouver and Zurich. The firm is headquartered in
New York.
In 2023, FGS generated $465m (£374m)
of net sales, $90m (£72m) headline EBITDA
(including depreciation of right-of-use assets) and $87m (£70m) headline operating profit, which WPP fully
consolidated given its controlling stake.
About KKR:
KKR is a leading global investment
firm that offers alternative asset management as well as capital
markets and insurance solutions. KKR aims to generate attractive
investment returns by following a patient and disciplined
investment approach, employing world-class people and supporting
growth in its portfolio companies and communities. KKR sponsors
investment funds that invest in private equity, credit and real
assets and has strategic partners that manage hedge funds. KKR's
insurance subsidiaries offer retirement, life and reinsurance
products under the management of Global Atlantic Financial Group.
References to KKR's investments may include the activities of its
sponsored funds and insurance subsidiaries. For additional
information about KKR & Co. Inc. (NYSE: KKR), please visit
KKR's website at www.kkr.com and on X @KKR_Co.
Contacts:
Investors and analysts
Tom Waldron +44 7788 695
864
Anthony Hamilton +44 7464 532
903
Caitlin Holt +44 7392 280
178
irteam@wpp.com
wpp.com/investors
Media
Chris Wade +44 20 7282
4600
press@wpp.com
Richard Oldworth +44 7710 130
634
Buchanan Communications +44 20 7466
5000
Goldman Sachs International (+44 20
7774 1000) is acting as sole financial adviser to WPP on the
Transaction.
Disclaimer
Goldman Sachs International, which is authorised by the
Prudential Regulation Authority ("PRA") and regulated by the
Financial Conduct Authority and the PRA in the United Kingdom, is
acting exclusively for WPP and no one else in connection with the
Transaction and will not be responsible to anyone other than WPP
for providing the protections afforded to clients of Goldman Sachs
International, or for providing advice in connection with the
Transaction or any other the matters referred to in this
announcement.
Cautionary statement regarding forward-looking
statements
This announcement contains statements that are, or may be
deemed to be, "forward-looking statements". Forward-looking
statements give the Company's current expectations or forecasts of
future events.
These forward-looking statements may include, among other
things, plans, objectives, beliefs, intentions, strategies,
projections and anticipated future economic performance based on
assumptions and the like that are subject to risks and
uncertainties. These statements can be identified by the fact that
they do not relate strictly to historical or current facts. They
use words such as 'aim', 'anticipate', 'believe', 'estimate',
'expect', 'forecast', 'guidance', 'intend', 'may', 'will',
'should', 'potential', 'possible', 'predict', 'project', 'plan',
'target', and other words and similar references to future periods
but are not the exclusive means of identifying such statements. As
such, all forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances that are
beyond the control of the Company. Actual results or outcomes may
differ materially from those discussed or implied in the
forward-looking statements. Therefore, you should not rely on such
forward-looking statements, which speak only as of the date they
are made, as a prediction of actual results or otherwise. Important
factors which may cause actual results to differ include but are
not limited to: the impact of epidemics or pandemics including
restrictions on businesses, social activities and travel; the
unanticipated loss of a material client or key personnel; delays or
reductions in client advertising budgets; shifts in industry rates
of compensation; regulatory compliance costs or litigation; changes
in competitive factors in the industries in which we operate and
demand for our products and services; changes in client
advertising, marketing and corporate communications requirements;
our inability to realise the future anticipated benefits of
acquisitions; failure to realise our assumptions regarding goodwill
and indefinite lived intangible assets; natural disasters or acts
of terrorism; the Company's ability to attract new clients; the
economic and geopolitical impact of the conflicts in Ukraine and
Gaza; the risk of global economic downturn; slower growth,
increasing interest rates and high and sustained inflation; supply
chain issues affecting the distribution of our clients' products;
technological changes and risks to the security of IT and
operational infrastructure, systems, data and information resulting
from increased threat of cyber and other attacks; effectively
managing the risks, challenges and efficiencies presented by using
Artificial Intelligence (AI) and Generative AI technologies and
partnerships in our business; the Company's exposure to changes in
the values of other major currencies (because a substantial portion
of its revenues are derived and costs incurred outside of the UK);
and the overall level of economic activity in the Company's major
markets (which varies depending on, among other things, regional,
national and international political and economic conditions and
government regulations in the world's advertising markets). In
addition, you should consider the risks described in Item 3D,
captioned 'Risk Factors' in the Group's Annual Report on Form 20-F
for 2023, which could also cause actual results to differ from
forward-looking information. Neither the Company, nor any of its
directors, officers or employees, provides any representation,
assurance or guarantee that the occurrence of any events
anticipated, expressed or implied in any forward-looking statements
will actually occur. Accordingly, no assurance can be given that
any particular expectation will be met and investors are cautioned
not to place undue reliance on the forward-looking
statements.
Other than in accordance with its legal or regulatory
obligations (including under the Market Abuse Regulation, the UK
Listing Rules and the Disclosure and Transparency Rules of the
Financial Conduct Authority), the Company undertakes no obligation
to update or revise any such forward-looking statements, whether as
a result of new information, future events or
otherwise.
Any forward looking statements made by or on behalf of the
Group speak only as of the date they are made and are based upon
the knowledge and information available to the Directors at the
time.
No
statement in this announcement is intended as a profit forecast or
estimate for any period and no statement in this announcement
should be interpreted to mean that earnings, earnings per share or
income, cash flow from operations or free cash flow for WPP or the
WPP group post-transaction for the current or future financial
years would necessarily match or exceed the historical published
earnings, earnings per share or income, cash flow from operations
or free cash flow for WPP.