Scangroup eyes Africa growth with Ogilvy

By Duncan Miriri

September 2, 2010 4:01 PM EDT

Kenyan marketing company Scangroup plans to use its latest acquisitions to ride a wave of interest from multinationals in Africa and win multi-country contracts.

Part-owned by WPP, the world's largest advertising group, Scangroup last month won shareholder approval to acquire a 51 percent stake in Ogilvy Africa BV and a 50 percent stake in Ogilvy East Africa, valued at more than 400 million shillings.

The stakes will give it minority stakes in eight countries and affiliate relations in 15 more.

"The reason we did this is not so we get immediate benefit to our numbers. It gives us an existing infrastructure," Scangroup Chief Executive Bharat Thakrar told Reuters.

"The strategy is to build on that infrastructure, so where we have got minority, to take that to controlling stake. It helps us with our strategy across sub-Saharan Africa."

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Scangroup has already won a significant contract from India's Bharti Airtel because of its ability to offer marketing services in several African countries.

Bharti entered Africa in June through the purchase of Zain's assets in the continent. Thakrar said the continent of 1 billion people will continue attracting more foreign firms keen on tapping the growing market.

Scangroup last month posted a 40 percent jump in first-half pretax profit as advertising picked up in line with a rebound in economic growth.

Its shares have soared since the Ogilvy deals was announced and they traded at 54.00 shillings on a trailing price to earnings ratio of 27.00 mid-way through the session on Thursday.

Thakrar said the impact of the acquisition would be felt fully next year, adding the firm will seek to raise its stake in some of the countries.

"Depending on how quickly we get the other acquisitions done, in 2012, we should have increased minorities to controlling in at least a couple of markets," he said.

He said the outlook for Scangroup's second half is positive, adding the integration of the newly acquired business would have a significant impact next year.

While Scangroup is well established in advertising, Ogilvy will bring important public relations business especially in east Africa.

He said Scangroup's digital business was doing well.

"Digital is getting very important. We are doing well with digital. There is a lot of demand because if you look at penetration in Kenya, it is quite big. More and more younger audiences are engaging on digital."