The World: The battle for control of Australia's ad market

the group, and with TCG comes control of the lion's share of the
Australian market.

Formerly Cordiant Communications, TCG was formed in 2003 after a
management buyout when WPP took over Cordiant. Sir Martin Sorrell's
holding company retained a 30 per cent share in the group, the remainder
being split between the management (15 per cent) and the investment
group Pacific Equity Partners (55 per cent).

PEP has initiated the flurry of interest around the group by announcing
last month that it would accept offers for its 55 per cent share. TCG
includes Australia's second-largest ad agency, the iconic George
Patterson Partners. Affectionately known as Patts, the agency has a
string of large, homegrown clients including Arnott's, the manufacturer
of Wagon Wheels and Tim Tam biscuits, and Tourism Australia. TCG also
includes the media agency Zenith, and a range of marketing and PR
companies.

As a shareholder, WPP has made an early bid to register its interest.
Omnicom has reciprocated with a bid of AU$80 million through its
Australian agency, Clemenger BBDO, way below the AU$120 million
value analysts place on the company.

A spokesperson for PEP coyly suggests there are more than these two
holding companies involved in the "ongoing healthy discussions" with up
to five other groups, a mix of global and Australian companies, and an
initial public offering has not been ruled out.

Opinion on how the sale of TCG will change the advertising landscape in
Australia is divided. Some call it "pivotal', others suggest TGC's
folding into WPP or Omnicom will make little difference.

"Patts was a powerhouse; it's not a powerhouse anymore. The only company
of any scale is Zenith. If it did make any fundamental difference to
advertising, it would be because Zenith was sold into a larger media
buying operation," one senior executive says.

The TCG management would clearly prefer to float rather than sell. The
common belief, among the Australian press at least, is that George
Patterson Partners will be merged with Young & Rubicam if WPP wins, or
with Clemenger BBDO if Omnicom is successful.

Anonymous barbs delivered via the press are par for the course these
days for the TCG camp, effectively gagged because of confidentiality
agreements and legal requirements surrounding the possible initial
public offer.

Ian Smith, the TCG chief executive, declined to comment on the details
of the sale or on its likely outcome, saying a that lot of rumour and
misinformation was doing the rounds.

"Overall, the tone of what is written is information supplied by
competitors for the purpose of trying to disrupt the business ...
occasionally, there's something interesting that someone has completely
and utterly made up, which gives you a laugh," he says.

What TCG is pushing to potential investors is the strong platform
provided by George Patterson Partners; Zenith's negotiating clout with
media sellers; its diversified revenue and earnings base; its high
percentage of revenue from local clients; and a strong management team
that has restored the group's growth since 2003.

One barrier it faces is the perception that TCG is George Patterson
Partners.

Smith explains that the flagship brand contributes only 23 per cent of
TCG's bottom line.

"One of the major things people don't understand is the diversity and
the underlying strength of the whole group," Smith says. "The vast
majority of people think it is about Patts, with a couple of other
things hanging off it. The reality is that it is a very broadly spread
and strongly diversified group."

TCG's portfolio also includes 50 per cent of the high-volume/fast-
turnaround shop hmaBlaze; the New Zealand agency Generator; and 50.1 per
cent of the retail specialist IdeaWorks. Zenith (which will change its
name at the end of the year after a dispute with Publicis Groupe, which
owns the Zenith brand) was the second-largest media outfit in Australia
in 2004, with billings of AU$570 million, up 3 per cent year on
year.

Earlier this year, TCG bought 55 per cent of Media Puzzle, a start-up
outdoor company. In marketing services, it owns 85 per cent of
Professional Public Relations, Australia's largest PR company; the sales
promotion company 20:20; and the design and branding company
Underline.

"We're one of the top three in Australia in terms of the overall holding
companies, along with STW Communications and Clemenger
Communications.

We are the only independent and we have a 50-50 split between above and
below the line," Smith says. Whether Sorrell, or someone else
altogether, gets their hands on his company remains to be seen.

"Martin has taken a pretty active interest in the running of the
business.

We've got no major beefs. I imagine he's pretty happy with the way
things have gone," Smith says.

THE POTENTIAL BUYERS ... and where they stand in the Australian market
WPP
30 per cent share in TCG
Young & Rubicam Australia
The Campaign Palace
JWT Australia
Ogilvy & Mather Australia
MindShare
Mediaedge:cia
Grey Australia

OMNICOM
Clemenger BBDO
DDB Australia
Whybin\TBWA
OMD Australia