Cordiant shares tumble as WPP prepares for £100m bid

by Gordon MacMillan,, Brand Republic 09-Jun-03, 08:50

LONDON – Sir Martin Sorrell's WPP Group is set to launch a £100m bid to acquire Cordiant valued at only 3p a share, which this morning sent the troubled ad group's share price tumbling more than 28%.

The deal will see WPP take on more than £90m of Cordiant's debt in a deal that will give shareholders in the group around £10m or 3p a share, according to a report in The Observer newspaper.

The deal would make WPP, which is currently the second largest advertising holding company after Interpublic, the largest advertising group in the world. It would add the struggling Bates Worldwide to its existing three main networks -- J Walter Thompson, Ogilvy & Mather and Young & Rubicam.

It would also acquire marketing services firm 141 Communications and health advertising business Healthworld, which are the two major attractions for WPP and the other leading bidder Publicis Groupe.

Neither Cordiant or WPP were commenting yesterday as news of the bid hit the headlines.

Shares in Cordiant were down 28.57%, or 1.25p, to 5p this morning, having closed at 7p on Friday. Shares in WPP closed at 513.5p on Friday and were trading down 1.02p at 508.25p this morning.

WPP officially confirmed on Monday that it engaged in due diligence and was looking Cordiant's books over.

If WPP's deal is successful it will reunite Sir Martin, the former Saatchi & Saatchi finance director, with part of the firm he once worked for. Bates formed one half of the Saatchi & Saatchi empire, with Saatchi & Saatchi Advertising forming the other.

Saatchi & Saatchi was sold to Publicis in 2000. It had been thought in the early stages that Publicis, which has a joint venture with Cordiant through media buyer ZenithOptimedia, was the frontrunner to buy the troubled group.

Also in the running was US hedge fund Cerberus Capital Management, which was putting together a bid with Grey Global.

The Sunday Telegraph, quoting a source linked to Publicis, said the French company was pulling out of the bidding for Cordiant. It is likely that if WPP is successful, it will sell Cordiant’s 25% stake in ZenithOptimedia to Publicis, which owns the rest.

Last week, Cordiant shareholder Active Value was putting on pressure for chief executive David Hearn to stand down and by replaced by a new management team. Active Value is keen for Cordiant to stay independent. However, the Cordiant board has made it known that it prefers to sell to a rival group.

Active Value revealed that Hearn and finance director Andy Boland are being incentivised to sell the group to a rival.

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