WPP PLC (LON:WPP) has agreed to sell a 60% stake in analytics business Kantar to private equity firm Bain Capital for US$4bn (£3.2bn) and plans to give some of the proceeds to shareholders.
The disposal is part of WPP’s strategy to simplify the business as it seeks to turn around its performance after a series of profit warnings and a hit to its reputation after founder Martin Sorrell stepped down as boss over allegations of misconduct, which he denied.
READ: WPP in exclusive talks to sell Kantar stake to Bain Capital
Earlier this month the advertising giant announced that it was in exclusive talks to sell a majority stake in Kantar to Bain, ending months long speculation around the auction.
WPP had also attracted interest from Platinum Equity, Vista Equity and Apollo Global Management for the stake, which it put up for sale last October.
Shareholder returns and debt reduction
In Friday’s deal announcement, WPP chief executive Mark Read said: "This transaction creates value for WPP shareholders and further simplifies our company.
“With a much stronger balance sheet and a return of approximately 8% of our current market value to shareholders planned, we are making good progress with our transformation."
Net cash proceeds of the deal after tax and a £0.4bn reinvestment to retain a 40% stake in Kantar will amount to US$3.1bn.
The company will use 60% of the proceeds to reduce debt and the rest of the cash, about US$1.2bn (£1bn) will be returned to shareholders.
WPP said it would announce how it intends to return the proceeds to shareholders in “due course”.
Deal to be 'marginally' earnings dilutive in 2021
It expects the proposed transaction and use of proceeds to be “marginally dilutive” to headline earnings per share in 2021.
Completion of the deal is expected in early 2020, subject to shareholder and regulatory approval.
Analysts at Liberum said: "The fact that the deal looks pretty much in line with what was thought and has been announced in line with the company’s previous announcement should provide confidence to the market."
The broker repeated a 'buy' rating and target price of 1,450p.