NAIROBI, October 24 – Advertising giant Scangroup Limited has a new majority shareholder in the name of WPP, one of the world\’s leading advertising and marketing services firms, which has acquired a 27.5 percent stake.
The takeover was approved on Friday at an Extra-ordinary General Meeting in Nairobi, when shareholders sanctioned the allocation and issue of 60,689,655 new shares to WPP through its subsidiary Cavendish Square Holding BV.
The deal will see a 27.5 percent reduction of share value for all shareholders to accommodate the new shares owned by Cavendish Square Holding BV.
Scangroup Chief Executive Officer Bharat Thakrar, who held a 28.45 majority stake, will now own 20.63 percent of the company.
In a statement released after the Extra-ordinary General Meeting Scangroup Chairman David Hutchison said the approval by shareholders fulfilled one of the key conditions to the transaction.
“Under the agreement, WPP has agreed to subscribe for the new shares at Sh22 per share which will result in a cash injection of Sh1.3 billion into the company,” said Mr Hutchison.
He added: “For Scangroup, this investment by WPP is significant because it gives the company a strategic anchor shareholder who will play a significant role in the management and succession of senior management.”
On his part, Mr Thakrar said the net proceeds from the issue would be used to fund working capital requirements and the company’s expansion in Kenya and other African markets in a bid to attain its vision of being the leading marketing services company in Africa by 2010.
“To me, the important aspect of this agreement is the strategic value that Scangroup will get from WPP. This will include technical know-how and well tested tools to help us work better here. We will also benefit from WPP’s specialist skills and increased opportunity for expanding our client base. We are better off having WPP as a partner rather than as a competitor in these challenging times”, said Mr Thakrar.
The agreement for the transaction entitles WPP to nominate two representatives to the Board of Scangroup Limited.
The group has already proposed Andrew Scott, who is WPP’s director for corporate development in charge of their global mergers and acquisition activities. The other nominee is Christopher Sweetland the Deputy Group Chief Financial Officer.
Mr Thakrar said Scangroup’s strategic alliance with WPP came naturally to both companies since they already had connections with the group through affiliation agreements, being JWT for Thompson Kenya and Grey Worldwide for Grey East Africa and a joint venture with Millward Brown through Millward Brown East Africa Limited.
The new relationship, he added, will see the extension of the existing affiliations and the establishment of new brands in the Kenyan and regional markets such as Tanzania, Uganda, Rwanda, Burundi, Ethiopia, Mozambique, Angola, Zambia, Malawi and the Democratic Republic of Congo.