WPP is now the majority shareholder of Scangroup with a 50.1 per cent stake. FILE
By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com
In Summary
- The media services company defies expectation of drop in price after listing of additional shares to accommodate acquisition of a further stake by WPP.
- The deal resulted in the creation of nearly 100 million shares which saw Scangroup’s listed shares increase to 378.87 million.
Scangroup’s valuation has shot up by Sh8 billion since the listing of additional shares created in December to accommodate acquisition of a further stake by global communications firm WPP.
The media services company has defied expectations
of a dilution in price that normally comes after listing of additional
stock, with the counter surging to Sh57.50 compared with the drop to
Sh46 immediately following the listing of the new shares.
The deal resulted in the creation of nearly 100 million shares which saw Scangroup’s listed shares increase to 378.87 million.
“Normally such a deal come with some dilution in
value of the share. However, Scangroup is now seen by investors as
having a strategic partner to take the company to a new level of growth.
The company’s fundamentals in the longer term look good, despite of the
problems we saw last year with the Nigerian unit,” said Kestrel Capital
market analyst Kuria Kamau.
WPP is now the majority shareholder of Scangroup with a 50.1 per cent stake.
The company was trading at Sh50 at the close of
last session before listing of the new shares on December 19, giving it a
valuation of Sh14 billion.
Upon the listing of the extra shares on December
20, the share lost eight per cent to close the session at Sh46.25 as it
adjusted for the new stock.
In the subsequent three weeks, however, the share
has gained 24 per cent to Sh57, valuing the company at Sh22 billion. The
stock has gained 15 per cent since the first day of trading this year.
The WPP deal was financed through a cash and share deal valued at Sh8.21 billion in August 2013.
The London Stock Exchange-listed firm offered cash
for 21.3 million shares at Sh85.85 each, amounting to Sh1.8 billion,
and also ceded ownership in nine subsidiaries to Scangroup.
The number of shares held by other shareholders
remained the same since the acquisition involved creation of new shares.
They, however, saw the percentage of their holding in the firm reduce
as a result.
Standard Investment Bank said it believes the
benefits of the deal will likely come later in 2014, given that the deal
was accretive, hence expected to increase the earnings per share.
Investors are also expected to benefit from the
cash injection and company’s increased earnings after taking full
control of the nine subsidiaries previously co-owned by WPP as part of
the deal.
Analysts now see the stock as benefiting from
positive investor sentiment as WPP’s changes in the top tier of
management start taking effect.
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