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US private equity group Bain Capital has agreed to acquire a 60% stake in Kantar, a WPP market research firm, as part of a transaction valuing the company at about $ 4 billion, according to a statement on Friday.
The valuation equates to a multiple of 8.2 times Kantar's earnings before interest, taxes, depreciation and amortization for 2018, the statement said.
If successful, WPP is expected to generate $ 3.1 billion after tax. The company said it will use 60% of the gains to reduce its debt and hand over the remaining $ 1.2 billion to its shareholders.
The agreement should be finalized early next year.
"As a strategic partner and shareholder of Kantar, WPP will continue to benefit from future growth as our customers continue to benefit from its services and capabilities," said Mark Read, WPP's Managing Director. "With a much stronger balance sheet and expected return of approximately 8% of our current shareholder value, we are making good progress in our transformation."
The sale is Mr. Read's latest initiative to streamline advertising after the resignation of his predecessor, Martin Sorrell, in April. This transaction marks the first significant reorganization of the company under the direction of Mr. Read.
Large private equity groups have abandoned a potential bid during the auction process, fearing that technology companies will disrupt market research firms.
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