WPP has announced that it has agreed to sell its entire majority stake in FGS Global, a strategic communications and advisory firm, to Kite Bidco, an entity controlled by investment funds managed and advised by Kohlberg Kravis Roberts (KKR). 

The transaction values FGS Global at USD 1.7 billion.

KKR initially made a minority investment in FGS Global in July 2023.

This new transaction accelerates the value realisation for WPP from its strategic advisory businesses, following the merger of Finsbury, The Glover Park Group, and Hering Schuppener in 2021, the subsequent acquisition of Sard Verbinnen in 2021, and the introduction of KKR as a minority shareholder in 2023. 

Through these transactions, FGS aims to provide advice to the stakeholder economy with over 1,400 experts and more than 1,600 clients.

The sale better positions WPP to focus on and invest in its creative, media, and corporate and consumer public relations businesses, thereby delivering growth and strengthening the Group’s balance sheet. 

The consideration for the sale of WPP’s approximately 50% stake, valued at USD 1.7 billion, is USD 775 million payable in cash at completion. This represents an attractive valuation multiple to the 2023 EBITDA.

The total cash proceeds of USD 767 million will be used to reduce WPP’s leverage, implying a pro-forma (companies to exclude certain expenses and gains from their published GAAP numbers) average net debt to EBITDA of approximately 1.60x. 

WPP aims to maintain its debt within the targeted range of 1.5-1.75x average net debt to EBITDA, allowing for business growth, dividend payments, and returning surplus capital to investors over time. 

The transaction forecasts no impact on WPP’s current year or medium-term guidance and is expected to be broadly earnings-neutral in 2025. 

Expected to close before the end of 2024, the transaction is subject to regulatory approvals and other customary closing conditions. 

As KKR holds an existing 28% shareholding in FGS, the transaction falls under UK Listing Rule 8.2.1R.

WPP’s board, advised by Goldman Sachs International, considers the terms of the transaction fair and reasonable for WPP shareholders. Goldman Sachs International has taken into account the board’s commercial assessment in its advice. The board believes this transaction is in the best interests of WPP shareholders as a whole.

Mark Read, CEO of WPP, said, “The sale of FGS represents an excellent outcome for WPP. Together with the management of FGS, we have built a world-leading strategic communications and advisory group,  creating considerable value for all stakeholders. We have achieved an attractive price, enabling WPP to accelerate the crystallisation of the significant value created. This also provides WPP with greater financial  and management flexibility as we continue to grow our core business including Burson and Ogilvy Public  Relations which give our clients access to world-class public relations services.” 

Alexander Geiser, global CEO, FGS, added, “Over the past four years, we have built one of the world’s leading strategic communications and advisory businesses from three independent consultancies and the addition of Sard Verbinnen. I would like to thank WPP for their help and long-standing collaboration in growing our firm. We are thrilled by the continued support of KKR, who also share our vision and strategy to be the leading advisor helping clients navigate the increasingly complex stakeholder economy. KKR’s  exceptional investment track record, extensive experience and global resources will be invaluable as we  further grow our integrated solutions globally as a standalone firm.”

Philipp Freise, partner and co-head, European private equity, KKR, said, “Our investment in FGS  reflects our strong commitment to strategic partnerships, where we provide long-term capital and global resources to entrepreneurial teams and world-class businesses. We strongly believe in FGS’s strategy and leadership and have been pleased with our partnership since our minority investment in July 2023. In today's increasingly complex stakeholder ecosystems, the value of FGS’s insight, advice and execution is increasingly essential for organisations to navigate uncertainty and achieve their goals. We look forward to  continuing our collaboration and helping FGS realise their vision as a global category leader.”