Cordiant this week provoked renewed speculation of imminent
takeover bids for its Bates subsidiary, as it announced detailed plans
for demerging the network along with Saatchi & Saatchi’s worldwide
operation.
The group’s official line is that better than expected, six-month,
pre-tax profit figures - up more than 30 per cent to pounds 20.2 million
- and the fact it is on course to deliver promises made at the time of
its 1995 rights issue, will be a major deterrent to would-be
predators.
’You couldn’t get Bates for anything less than pounds 300 million,’ a
Cordiant source said.
But Lorna Tilbian, Panmure Gordon’s media analyst, said Bates’s loss of
major accounts, such as Miller Brewing (pounds 130 million) in the US
and Compaq computers in Europe (pounds 33 million), was ’a hidden
profits warning’.
Bates and Saatchi shares are expected to be worth between 75p and 85p
when trading begins on 15 December. Tilbian said: ’I would expect Bates
shares to go to premium levels on demerger because the market will see
it as a takeover candidate.’
Senior executives of Grey Advertising, which shares the British American
Tobacco global roster with Bates, are believed to have discussed a
possible bid. However, Bob Willott, a partner in the accountancy firm,
Willott Kingston Smith, said he expected would-be buyers - rumoured also
to include Interpublic and Martin Sorrell’s WPP - to adopt a
wait-and-see approach.
’My guess is that they will wait for the dust to settle and see whether
or not Bates makes money,’ he said. ’Michael Bungey (the Bates Worldwide
chairman) has 12 months to prove he is running a genuinely successful
business. Takeover talk may even provide Bates with the spur it
needs.
There’s a great incentive to be successful if you’re fighting for your
independent survival.’
Bungey’s cause is helped by a resurgent Bates New York - for so long the
network’s achilles heel - which is being re-energised with new hirings
by Bill Whitehead, the Bates North America chairman. The agency claims
to be pitching for a quarter of a billion dollars worth of new business
and recently won the pounds 40 million account of Citizen Value Stores,
the second-largest drugstore chain in the US.
Bungey said this week: ’The only safeguard against possible takeover is
performance. We’ve set ourselves tough targets but we think we can do
it, and if we do, we will put smiles on our shareholders’ faces. This
company isn’t for sale as far as I’m concerned.’
Senior managers hope to inspire confidence in the demerger - about 70
from each network will make personal investments of up to pounds 150,000
each, generating an estimated total of pounds 6 million.
Bob Seelert, the Cordiant chief executive, who will be executive
director of the demerged Saatchi group, said: ’It if falls on its arse
it will be our money down the drain.’
The demerger will result in Bates, the Hamburg-based network, Scholz &
Friends, and HP:ICM uniting under a new holding company to be called the
Cordiant Communications Group, with Bungey as chief executive.
The Saatchi group will comprise Saatchi & Saatchi Worldwide, Rowland
Worldwide, the US shop, Cliff Freeman & Partners, and Siegel & Gale.
Zenith, the Cordiant media operation, which will be jointly owned by the
two groups.
Publicly, Bungey and Seelert are united in their belief that their
common ownership of Zenith is a long-term proposition, which will be
unaffected by the networks’ different cultures and agendas. But Cordiant
sources cast doubt on the arrangement’s durability. ’Joint ownership is
rarely permanent,’ said one. ’Zenith is likely to be bedded down until
somebody comes along with an offer.’
WHO WILL OWN WHAT
CORDIANT COMMUNICATIONS GROUP PLC COMPRISES:
Bates Worldwide (advertising and integrated marketing)
Scholz & Friends (advertising and integrated marketing)
HP:ICM (event marketing and brand experience)
Average number of employees in 1996: 4,925
1996 pro forma financials:
Revenue from ongoing business: pounds 336.8 m
Earnings before interest and tax: pounds 23.7 m
Adjusted earnings per share: 5.3p
SAATCHI & SAATCHI PLC COMPRISES:
Saatchi & Saatchi Worldwide (advertising and creative marketing)
Rowland Worldwide (public relations)
Cliff Freeman & Partners (advertising)
Siegel & Gale (corporate positioning and identity)
Average number of employees in 1996: 4,692
1996 pro forma financials:
Revenue from ongoing business: pounds 382.4 m
Earnings before interest and tax: pounds 22.4 m
Adjusted earnings per share: 4.1p
ZENITH MEDIA WORLDWIDE
(to be owned jointly by CCG and Saatchi & Saatchi)
Average number of employees in 1996: 880
1996 pro forma financials: Revenue from ongoing business: pounds 48.7 m
Earnings before interest and tax: pounds 8.3 m
THE FACILITIES GROUP
(pre-production services in design, print and TV) to be owned 70 per
cent by Saatchi & Saatchi and 30 per cent by CCG.
