As CEO Mark Read understatedly put it on a call with analysts today, WPP had a “positive” week, winning two big pieces of new business (Eurostar and Centrica) and capping it off with a deal to off-load a majority stake in Kantar to Bain Capital.
Investors seemed pleased, moving the stock up more than half a point Friday.
The deal to sell Kantar, Read noted, is “another important step” in the company’s transformation journey as outlined in a three-year plan last December.
The deal, Read suggested gives WPP the ability to serve its clients’ data needs without owning it — the tack taken by competing holding companies like Interpublic and most recently Publicis Groupe.
Kantar accounted for about 15% of the company’s revenue and profit last year, he said. The transaction will enable the firm to focus more on the remaining 85% of the company. A top priority is righting North American operations.
WPP will have a stronger balance sheet going forward as the deal — expected to be completed early next year — will put the company a year ahead of its debt-reduction goals.
Like the broader marcoms industry, Read said, “data is being transformed by technology.” With the new ownership structure, Kantar will be in a better position to make strategic investments, led by Bain but with participation by WPP.
The holding company’s 40% stake in the firm ensures it will have continued access to Kantar’s data. Read noted the holding company has some 1,000 data partnerships globally with many of the biggest players, like Google and Alibaba, and the deal could help “connect it all.”
One analyst asked if WPP would continue to have access to Kantar data once Bain realizes its profit goals and decides to cash in. “There are no concerns around that,” Read replied. The company’s 40% stake would seem to support the point.