TMB-Grey talks fail as ad shares dive by 40%

The Media Business Group has ended talks about a sale to Grey, signalling the first tangible effect of the global economic slowdown on the advertising sector.

The Media Business Group has ended talks about a sale to Grey,

signalling the first tangible effect of the global economic slowdown on

the advertising sector.



City analysts say advertising shares have tumbled by more than 40 per

cent since the summer and, in an statement to the City on Tuesday, the

Media Business blamed the breakdown in negotiations on ’large falls in

the equity markets worldwide’.



Paul Richards, a media analyst at Panmure Gordon, observed: ’I’m not

surprised talks have broken down because there has been such a rapid

decline in the value of quoted media stock. If you build a media

business from scratch and sell it you will hold out for price. Ad agency

stocks have fallen between 30 and 50 per cent in value.’



The Media Business Group’s share price tumbled 32.5p to 72.5p on the

news.



A merger would have led to Grey’s media affiliate, MediaCom, ascending

the media agency ladder from ninth place into the top five. The talks

had been ongoing for more than six months and sources say an agreement

had been reached on the structure and staffing of the company, but price

remained a stumbling block.



Allan Rich, chief executive of the Media Business, said: ’We are glad

it’s out of the way because it’s been over six months. We’re looking

forward to moving into a new building and picking up where we left

off.’



Richards saw further difficulties for the UK market over the next six

months, but said the UK need not go into deep recession if interest rate

policy was used wisely.



The Chancellor Gordon Brown’s decision on Tuesday to slash his growth

forecast for the economy, however, could lead to further instability on

the stock market.



Agencies’ share prices in 1997-98

                         Price            52 week

                         (6 October)

                                       high     low

AMV Group                248p          445p     248p

Aegis                    77p           112.5p   57.5p

Chime Communication      40p           63p      40p

Cordiant Communication   100p          137p     88p

Media Business Group     72.5p         136.5p   70p

Saatchi & Saatchi        99p           185p     97.5p

Tempus                   185p          269.5p   162.5p

WPP                      218p          488p     200p

Source: FT



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