Marketing services firm Scangroup #ticker:SCAN expects to complete the sale of its stakes in data and research company Kantar in the first quarter of next year in a transaction will earn it a gain of Sh2.6 billion.
Scangroup’s London-based parent company WPP, which initiated the transaction, has already completed the sale of its 60 percent equity in Kantar ahead of schedule.
The Nairobi Securities Exchange-listed firm says it expects to hold an extraordinary general meeting in January where the deal will be put to a shareholder vote.
“We expect to complete the transaction in the first quarter once we receive regulatory approvals,” said Bharat Thakrar, Scangroup’s chief executive.
He added that the deal will require approvals from Kenya’s Capital Markets Authority (CMA) and regulators in other markets including Nigeria and Tanzania.
Scangroup will receive about Sh5 billion in the transaction and will use Sh2 billion or 40 percent of the proceeds to pay a special dividend. This will amount to a payout of about Sh4.6 per share.
The quick sale by WPP, ahead of the earlier mid-2020 schedule, is expected to also make it easier for Scangroup to complete its end of the deal.
“The completion of the Kantar transaction, earlier than anticipated, achieves the objective we set out in December 2018 to strengthen our balance sheet, and substantially completes our disposal programme,” WPP’s chief executive Mark Read said in a December 5, 2019 trading update.
According to an existing agreement between WPP and Scangroup, the global deal also commits the Nairobi Securities Exchange-listed firm to sell its stakes in the Kantar affiliates it owns in Africa.
These include scores of operating units in various African countries housed under investment holding companies Millward Brown and Research and Marketing (which Scangroup acquired just last year).
The company invested Sh1.2 billion to acquire a 100 percent stake in Millward Brown and also incurred a similar expense in cash and stock to take an 80 percent equity in Research and Marketing.
This brings the total cost to Sh2.4 billion, meaning that the company will make a profit of Sh2.6 billion when it sells the subsidiaries for Sh5 billion.
Scangroup’s normal dividend stands at Sh1 per share and the upcoming special payout will significantly boost returns for shareholders. For Scangroup, the impending disposals will further boost its cash pile which stood at Sh4.4 billion in the year ended December 2018.