WPP is offloading a majority stake in market-research unit Kantar to Bain Capital Private Equity in a deal that should bring the ad holding company $3.1 billion in proceeds.
Bain Capital Private Equity will acquire 60% of Kantar as part of the agreement, valuing Kantar at $4 billion.
WPP, the world's largest advertising agency company, has worked to sell off companies, cut staff and simplify its client offerings as it navigates a turnaround it kicked off last year after a period of decline. It merged creative agency institutions like Young & Rubicam and J. Walter Thompson with more digitally-focused shops to give clients a more integrated service, instead of forcing them to work with multiple agencies across the holding company.
After WPP CEO Mark Read took the helm of the holding company last year (following the high-profile exit of former CEO Martin Sorrell), Kantar became an early target to sell off. Goldman Sachs analysts last year called Kantar a "notable drag on organic growth" for WPP in recent years. WPP will use the proceeds of the Kantar deal to cut its debt.
WPP's offloading of Kantar comes as other ad holding companies have made major investments in the data space. Interpublic Group of Cos. last year acquired data marketing company Acxiom Marketing Solutions for $2.3 billion, while Publicis Groupe bought marketing services company Epsilon earlier this year for $4.4 billion.
Liberum in a research note Friday said the deal is a positive step for WPP's new management.
"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," Liberum said.
Ad agency holding companies have faced intense competition from digital companies like Google and Facebook, and increasingly from consultancies like Accenture. Meanwhile, some clients are bringing advertising services in-house, citing cost concerns and the control of their own data. Liberum analysts said WPP will need to continue to "readjust itself."
"We see significant upside in WPP, which we think has a collection of very attractive assets," Liberum said. "Fundamentally, we do not believe the Agency model is broken, more that WPP has to readjust itself to the changes that have occurred and reduce its reliance on the traditional media business to drive profits."