Scangroup deal ups WPP’s might in Sub Saharan Africa

By PATRICK GITHINJI

WPP Plc, a communications services company, has expanded its interest in marketing services business in Sub-Saharan Africa, following a joint venture deal with Scangroup via the Ogilvy network.

On Friday, Ogilvy & Mather (O&M) Worldwide and Scangroup Limited, confirmed they had sealed a deal a month after The Standard exclusively broke the story in our premium business pullout The Financial Journal.

O&M and WPP agreed to create a pan-African joint venture via a share swap transaction, subject to regulatory and shareholder approvals to strengthen a common expansion and growth strategy for the region.

"The joint venture was born from a shared vision to ensure Ogilvy and Scangroup’s African operations were positioned to offer real breadth and depth of marketing services right across Africa," a press statement stated.

This joint venture continues WPP’s strategy of investing in fast developing markets in accordance with its strategy for Africa.

Ogilvy Worldwide CEO Miles Young said: "I passionately believe that sub-Saharan Africa is one of the last great frontiers in global communications — and that it will be one of the most fertile".

He added, it is the time to invest, ahead of the curve, just as we have done in other developing geographies. "Africa’s growing middle class, increasing political stability, fast economic growth and attractive talent base make it a critical component of any truly global business strategy," said Young.

subsidiaries

Both Scangroup and Ogilvy & Mather are indirect subsidiaries of the WPP Group that holds a 27.5 per cent stake in Scangroup Limited, acquired in 2008.

Scangroup has been entering into joint ventures with WPP Group network of companies. In 2007, Scangroup established a joint venture with Millward Brown. Other recent Scangroup joint ventures are field-marketing services Smollan East Africa Limited, public relations consultancy Hill & Knowlton East Africa, and Squad Digital, a specialist digital marketing consultancy.

According to the agreement, Ogilvy South Africa will partially exchange shareholding in its operations outside South Africa, for a combination of Scangroup shares and cash consideration.

A new Ogilvy Africa CEO will be appointed to co-ordinate and service pan-African clients, as well as manage network affiliates across the markets from Johannesburg and Nairobi.

The partnership creates the first African powerhouse in the marketing services business.

Sources familiar with the deal told The Standard no operations will be merged, and that the two firms will work independently.

"As WPP associate networks, both Ogilvy Africa and Scangroup agencies will co-exist, but be expected to compete the way all WPP agencies operate globally".

Increase shareholding

At the same time, Scangroup will buy a 50 per cent shareholding of Ogilvy East Africa and a 51 per cent stake in O&M Africa BV from Dolphin Square Holding BV and Oglivy South Africa Limited.

M Kipchumba, the Company Secretary of Scangroup said the agreements are subject to the granting of necessary approvals form the Capital Market Authority and the shareholders of Scangroup as well as the Reserve Bank of South Africa.