Cordiant finalises deal to sell off Australian business
LONDON - Cordiant has agreed a deal to sell 70% of its Australian business, including the ad agency George Patterson Bates, to venture capitalists for £24.6m as talks with Publicis Groupe, which could lead to the sale of the entire company, continue.
As details of the Australian deal emerged, Cordiant said that its board is continuing to advance talks that could lead to the sale of Cordiant. However, it reiterated its statement of May 12 and said that "none of the proposals currently under consideration is likely to result in an offer at or near the current share price".
Cordiant insiders are said to favour a deal with Paris-based group Publicis, according to senior managers quoted by Campaign.
"It seems to offer the best potential opportunities for the largest number of our people," a source said.
The Australian business is being sold to venture capitalist firm Pacific Equity Partners, which takes a 55% stake in Cordiant's Australian operation The Communications Group, with TCG management holding 15%, and Cordiant hanging on to a sizeable 30% minority stake.
By holding on to a big stake in the business, Cordiant retains a presence in the Australian market and the ability to service its clients on a international basis. The move is also similar to those other large agency groups that have kept a presence down under through minority equity stakes.
Cordiant will used the cash raised from the deal, which is conditional on shareholder approval, to reduce its debts. In addition, Cordiant said that it will take surplus cash of £16.5m, which will be used to reduce net borrowings.
David Hearn, the Cordiant chief executive, said: "This is a good deal for Cordiant and for the clients and employees of our Australian businesses. This transaction will allow the Bates Group to continue to service its international clients effectively, while at the same time executing the first stage of our debt reduction programme."
The Bates Group will continue to service its existing international clients in the Australian market through the new company, The Communications Group Holdings, and as part of the deal the Australian business will sign service level deals with each of the Bates Group networks.
The deal does not include creative agency The Campaign Palace, which operates independently of George Patterson Bates and will remain part of Cordiant.
In a separate deal, Cordiant said it will sell its interest in Western Australia-based agency Marketforce to its management.
TCG through its various businesses offers a complete range of services to clients from advertising and media planning and buying, to direct marketing and interactive services. The group has approximately 900 employees, with offices in Sydney, Melbourne, Brisbane and Auckland.
George Patterson Bates, the main agency of TCG, was founded in 1934 and acquired by Bates Worldwide in 1964.
In the year ended December 31 2002, TCG's businesses on a combined basis generated revenues of £51.6m and profit before tax of £2.1m.
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