The advertising group WPP is in final negotiations to sell its majority stake in financial communications firm FGS Global to private equity group KKR for around $800 million. According to three people familiar with the talks, the agreement could be announced as early as Wednesday, when WPP presents its next financial results.
As part of the planned deal, WPP will sell its 50.5% stake in FGS for about $800 million, valuing the company at approximately $1.6 billion in total. KKR will increase its stake from about 30% to around 80%, while the remaining shares will be held by the partners and the management of the company.
Sources close to the deal emphasized that it is important for the partners to continue holding a portion of the equity as an incentive for their retention. However, a final agreement had not yet been reached as of Tuesday. WPP and KKR declined to comment.
FGS Global emerged from the merger of the London-based firm Finsbury, the Frankfurt-based Hering Schuppener, and the Washington DC-based Glover Park Group. The company has nearly 30 offices worldwide and serves more than 1,600 clients. Last year, the group achieved a revenue of about 450 million dollars and an earnings before interest, taxes, depreciation, and amortization (EBITDA) of around 95 million dollars.
Sure, here is the translation to English:
"By purchasing FGS, KKR aims to further expand the business and either find a buyer or go public in the coming years. The financial communications industry is currently undergoing a wave of consolidation, as companies that once focused on the domestic market are now bundling their services to offer comprehensive coverage for top executives, corporations, and financial groups.
Not all acquisitions in this industry, however, went smoothly. The private equity group CVC faced difficulties after their investment in FGS competitor Teneo in 2019, when two of the three founders abruptly departed within a few months during the pandemic following a series of scandals.
The sale of FGS comes just days after the appointment of Philip Jansen as the new chairman of WPP. This appointment, first reported by the Financial Times, is expected to lead to a renewed review of the company's future strategy. Jansen has extensive experience in the corporate sector, including with BT and Worldpay.
The deal will strengthen the financial position of the advertising network, which has been under scrutiny in recent months for performing relatively weak compared to competitors like the French Publicis. At the same time, the deal will reignite discussions about whether WPP's stock price fully reflects the value of its various business sectors, which cover media, marketing, PR, and advertising worldwide.
WPP increasingly positions itself as a technology-oriented company, using artificial intelligence and data-driven services for its clients to create targeted campaigns more quickly and effectively.
FGS was increasingly seen as not part of the core business of the agency network, which already owns Burson, one of the world's largest PR firms, as well as BCW and Hill & Knowlton under Corey duBrowa, the former head of communications at Google. Other agencies in the network, such as Ogilvy, also offer PR services.
The Financial Times revealed earlier this year that KKR had made an approach to acquire the majority of FGS. The private equity group acquired approximately 30 percent of the company in a deal that valued Finsbury at around $1.5 billion in 2023. Under the deal, WPP remained the majority owner of the company with approximately 50.5 percent of the shares, while FGS employees held the rest.
The deal could also delay the company's plans for an IPO in the next two years. Goldman Sachs is advising WPP on this matter.
