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New WPP boss passes first test
WPP (WPP) 964p
Gain to date: 12.9%
Original entry point: Buy at 854p, 14 March 2019
Chief executive Mark Read achieved an important first step in his revamp of the group with the sale of a 60% stake in WPP’s (WPP) Kantar market research business to private equity firm Bain Capital.
Proceeds to WPP on completion after tax and continuing investment in Kantar are expected to be around $3.1bn. Some of this will be returned to shareholders but a good chunk will go towards paying down debt.
The flipside is some limited earnings dilution after the deal completes in early 2020.
Investment bank Liberum comments: ‘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.’
Read’s leadership will next be under the scrutiny of the market when the company reports its first half results on 9 August.
SHARES SAYS: This news increases our confidence in the repair job Read is doing at WPP. Keep buying the shares which are on an undemanding forward price-to-earnings ratio of 9.7 and yielding 6.2%.