Global communications firm WPP is set to raise its stake in its local subsidiary WPP Scangroup to 56.25% by acquiring an additional 6.1% equity.
The all-stock transaction, valued at Ksh 926.6 million, will see Scangroup issue 53.2 million shares to Russel Square Holding, another entity controlled by WPP.
Russel will in turn hand over to Scangroup its 70% stake in Mauritius’ Research and Marketing Group Investment Limited.
The transaction, expected to be completed by end of July, mirrors a 2013 deal that saw WPP take a controlling 50.1 per cent stake in Scangroup by offering Ksh 1.8 billion in cash and surrendering its interests in nine subsidiaries to the Nairobi Securities Exchange-listed firm.
“Consequently, Russell BV and its associated persons (Cavendish BV, Ogilvy & Mather and WPP) will beneficially own an aggregate of … 56.25 per cent of the issued shares in WPP Scangroup,” Rusell said in a notice.
The deal comes at a time when Scangroup’s share price has fallen by two-thirds to Ksh 17 from highs of Ksh 50 in March 2015 when the last bull market ended.
The company is trading at a 28 per cent discount to its net assets but at a premium ratio to earnings of 14, reflecting lower profits in recent years.
Scangroup’s net earnings have been volatile, more than tripling from Ksh 244.4 million in 2007 to peak at Ksh 9*1.1 million in 2011 and then nearly halving to Ksh 460.3 million in 2016.
They rose 3.8% to Ksh 479.9 million in the year ended December, largely driven by lower costs.
The entry of WPP has seen a flurry of mergers and acquisitions at Scangroup, in line with the multinational’s global strategy of pursuing growth by taking over rival marketing services firms.
The global advertising giant’s founder and long-serving chief Martin Sorrell recently resigned from the company amid investigations into alleged misuse of the company’s assets, raising the prospect that a successor could adopt a different strategy for the conglomerate.
Meanwhile, the company has partnered with Google Africa to roll out a digital advertising solution that will serve its clients across the continent.
In a j***t statement, the two firms on Thursday said the solution dubbed “Doubleclick suite”, will enable the agency purchase and sell advertisement space in real time, and simplify advertising campaign management from media planning to reporting.
Chief executive Bharat Thakrar said they are confident that the partnership will cement the agency’s top position in the region.
“With more than 80 per cent digital media in the US and 60 per cent in the UK sold programmatically in 2017, and a renewed focus by advertisers on media efficiency, brand safety and ‘viewability’, we are confident that this partnership will cement WPP Scangroup’s position as a leading digital media house in the region,” said Mr Thakrar.
Google Kenya’s country manager Charles Murito said the partnership will re-define how media is planned and bought in the region.
– Story by Victor Juma and Joseph Ngunjiri/NMG