Kang'aru Wachira
24 October 2008
Nairobi — Shareholders of Scangroup approved the sale of a 27 per cent stake in the company to British transnational WPP on Friday.
The deal, which had already been approved by regulators, will see WPP take up the single largest holding in Kenya's biggest and only listed marketing communications firm through a subsidiary, Cavendish Square Holding BV.
WPP is a holding company to various advertising and marketing services companies around the globe.
A statement released after the company's extra-ordinary general meeting said that the shareholders approved the issuing and allocation of about 60.7 million shares to WPP. The new shares are priced slightly above Sh1.3 billion.
In the statement, Scangroup chairman, Mr David Hutchison, said the company will now issue 60 million new shares to Cavendish Square Holding BV as per agreement signed in mid August 2008.
"Under the agreement, WPP 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," Mr Hutchison noted.
The approval makes WPP the largest single shareholder in Scangroup Limited after diluting the current majority shareholders stakes.
Managing director, Thakrar Bharat's 45 million shares now translate to a 20 per cent holding down from 28.35 per cent, while the group creative director, Andrew White's 16.5 per cent will be diluted to 11.8 per cent.
The other single largest shareholder, Bora Services Limited's 19 million shares translate to an 8.6 per cent holding.
The group chief executive, Mr Bharat Thakrar, said the net proceeds from the issue of the new shares will 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.
"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," said Mr Thakrar.
"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."
The agreement for the transaction entitles WPP to nominate two representatives to the Board of Scangroup Limited.
Mr Thakrar said the company's strategic alliance with WPP came naturally to both companies, since the two already had connections through affiliation agreements.
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