Cordiant: The Phantom takeover
Even bad news seems to work in unexpected ways. Take a look at Cordiant which yesterday, having warned of a gloomy outlook for the second half, saw its stock rally 7%.
The comeback saw Cordiant recover some of the losses it suffered last week, when its share price dropped 20%, hitting a two-year low at 149p.
Yesterday, the talk was again that the company was ripe for takeover, a story that has been running on and off for the past 18 months. Early last year, Cordiant chief Michael Bungey hung the for-sale sign outside the Bates-owning network, eagerly telling the world that Cordiant was ripe for a takeover from rivals and suggested they move quickly before the price went up.
Last week, the shares fell because it was feared that Cordiant was set to announce bad news, and it was. Although this news was dressed up somewhat -- interim pre-tax profits rose to £22.1m -- bad news was still what it was.
The news was no worse than anyone expected. More job cuts are to come; the group is suffering in the US, where it is highly exposed to technology clients; and revenue growth for the second half will be flat. But that seems to nicely sum up the downturn in advertising for you.
So the bad news was there for all to see and it seems to suggest that Monday morning's rally will not last. Which brings us to the sale of Cordiant itself.
So is Cordiant a takeover target? Yes, but only in the sense that all of the small remaining independent marketing communications firms are, including Lord Bell's Chime Communications, Incepta and the Carat Group-owning Aegis, like Tempus a much more tempting target.
Will they be sold too? Yes, but probably not today and not within the next six months.
Of course, the City would like to see Cordiant sold. Snapped up by the gang of three -- WPP, Omnicom and Interpublic -- which are linked to Cordiant every time a for-sale story is written.
But, with a flat year ahead and heavy exposure to the US market, is this the right time to snap up Cordiant? It does not seem so. The big three have their own problems and, as for WPP and Interpublic, they have recently spent large to acquire networks -- WPP with Young & Rubicam and Interpublic with True North.
What is intriguing about Cordiant is how regularly the for-sale flag is run up the pole. Prior to Bungey's own comments, Cordiant, more than any other group, has been regularly touted as a takeover target.
Analysts saw last summer's $421m (£296.2m) acquisition of the Lighthouse Global Network, as well as a string of other smaller marketing and PR firms, as a sign that Cordiant was being readied for a sale.
Then the idea seemed to be to beef up Cordiant's marketing services arm and its US market share -- well, it seemed like such a good idea at the time.
Bungey admitted as much then, that the acquisition of Lighthouse was akin to fattening the company up for a sale.
Then came the talks with True North, which came to nothing. So, still no buyer.
Now the share price is up again. Maybe it will be down again by the time you read this. But then Bungey is probably as aware as anyone else that investments can go up as well as down, which probably has something to do with him wanting to cash in his chips.
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