News of the sale of a 60% stake in its Kantar market research division was almost exactly in line with what investors were expecting from advertising giant WPP (WPP).
In response its shares are enjoying a modest bump, marked 0.7% higher to 961.6p.
The company has agreed to sell 60% of Kantar to private equity firm Bain Capital in a deal that valued the business at around $4bn including debt.
Proceeds to WPP on completion after tax and continuing investment in Kantar are expected to be around $3.1bn (£2.5bn).
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Some of this will be returned to shareholders but the main impact will be on reducing WPP’s debt pile. The trade off is a slight reduction in earnings in the short term. Completion is expected in early 2020.
Perhaps more importantly the news lends greater credibility to new CEO Mark Read and his efforts to reset the business. This process is arguably the first real test Read has faced and he has passed.
Liberum comments: ‘The fact that this deal has been done without any drama and in line with expectations at pretty much all levels (price, return of proceeds, and in line with the stated timeframe) will not only be seen as a relief but should also increase the market’s confidence in management’s ability to execute its strategy.’
