Advantage Solutions to streamline, restructure international businesses

Advantage Solutions announced a plan to streamline and restructure its international businesses in an effort to sharpen its focus on core markets and accelerate growth. The changes will reduce back-office complexities and expenses, simplify financial reporting, eliminate losses in certain Asian businesses and enable the company to trade a minority interest in a foreign business for shares of Advantage stock. As part of Advantage’s simplification efforts, the company has reduced its stake in Advantage Smollan Limited, a joint venture with the Smollan Group operating in Europe, from a majority stake of under 60% to a minority position of 49.6% in exchange for cash and other considerations. Advantage’s resulting stake preserves a substantial interest in the European business and access to its future growth potential. Financially, the move will de-consolidate Advantage Smollan’s revenue and international cash holdings while leaving adjusted EBITDA contribution to Advantage largely unchanged. On an annualized basis, the transaction is anticipated to reduce Advantage’s reported revenue by approximately $400 million and improve its adjusted EBITDA margin by approximately 100 basis points. In addition, Advantage expects to benefit from an operational perspective via a reduction in back-office activities such as accounting and systems management. Additional changes to Advantage’s international business include: Advantage has swapped a minority interest in a small foreign asset for approximately 2 million Advantage shares from a legacy lower-middle-market investor involved in the historical sponsor consortium that acquired Advantage Solutions in 2014. This transaction reflects the company’s confidence in Advantage stock and what it views as a fundamental disconnect to inherent value in the public markets. The small foreign asset did not meaningfully contribute to Advantage’s revenue or EBITDA. The company also discontinued two Daymon business units in China that were not profitable, opting to focus its resources on its growing experiential and in-store marketing business in the country. Advantage continues to view Asia as a key growth market, and the company expects the streamlining effort to enable it to serve the market in a more focused and profitable way. Advantage will continue to realize growth from international markets via its ongoing large minority stake in Advantage Smollan, its direct minority stake in the Smollan Group and through its wholly owned operating businesses, which include its private-brand and experiential services business units that operate in more than a dozen countries. Advantage also continues to directly operate a large business in Canada.