Why did Ascential shares surge by 35%?

Ascential (LSE: ASCL) revealed on Monday its decision to divest its digital commerce business to Omnicom Group Inc and its product design arm to funds advised by Apax Partners LLP. The combined enterprise value of these transactions stands at £1.4 billion, fetching Ascential £1.2 billion in cash proceeds.

Upon completion, Ascential plans to distribute £850 million to its shareholders. Following this news, Ascential’s shares soared, rising by 35% to 290.20 pence each in early trading, making it the FTSE 250’s top performer.

Omnicom, a prominent New York-based media corporation, will acquire Ascential’s digital commerce sector for an enterprise value of $900 million. As part of the deal, Ascential’s CEO Duncan Painter is set to assume the role of CEO at Flywheel Digital, a newly established division within Omnicom.

Meanwhile, Wind UK Bidco 3 Ltd, an entity associated with Apax Partners, will purchase Ascential’s product design business for an enterprise value of up to £700 million, ultimately bringing in £572 million for Ascential post-closing adjustments.

Both transactions are slated for completion by the end of the first quarter of the upcoming year.

Ascential Chairman Scott Forbes expressed confidence in the sales, stating, “The board firmly believes that the proposed sales of Digital Commerce and WGSN represent excellent value for shareholders, including the return of a significant portion of the combined proceeds. Furthermore, these actions are compelling in that they will enable us to achieve the objectives of the strategic review, addressing the distinct investment propositions of Ascential’s three businesses, while also better positioning each business to achieve their growth ambitions.”

In a related development, Ascential disclosed the initiation of a sale process for its US-based subsidiary, Hudson MX. Ascential holds a 36.5% stake in Hudson, a provider of software-as-a-service media buying and accounting solutions. Omnicom has confirmed its participation in the sale.

To ensure a smooth transition, Ascential has entered into new agreements with MT II Holdings LP, a key stakeholder in Hudson. These arrangements secure MT II’s financial interests, guaranteeing them £66 million in the event of a successful sale, expected to conclude by the first half of 2024.