FT Reports WPP To Sell Stake In FGS To KKR

Rating: Baa2/BBB

Reports of KKR interest were known though this is more concrete, and the timing suggests an announcement with results tomorrow. Credit positive if used for deleveraging; no indication of the use of proceeds has been given - leverage is currently above guidance but only slightly so.

• FT reports that KKR is close to acquiring WPP’s 50.5% stake in FGS Global for USD 800mn, valuing FGS at $1.6bn. Post-deal, KKR’s ownership in FGS will rise to 80%. Nothing signed yet.
• Article states that FGS generated $450mn in revenue and $95mn EBITDA last year; this compared to WPP’s GBP 14.8bn in revenue and GBP 1750 in headline operating profit.
• No signal of what the proceeds would be used for though we note that leverage is currently above the target range; USD 900mn is the equivalent to just over GBP 700mn which, taken with the slight reduction in EBTIDA, is the equivalent of a 0.47x decrease in FY23 net leverage from 1.83x to 1.36x. against the MT framework of 1.5-1.75x.
• The acquisition is seen as a strategic move for expansion and future exit via sale or IPO; the deal might delay plans to float FGS in the next two years.
• WPP reports earnings tomorrow which seems like the likely place to announce the deal.