Cordiant discloses full details of its demerger

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.

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


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


’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


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.’



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 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


(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


(pre-production services in design, print and TV) to be owned 70 per

cent by Saatchi & Saatchi and 30 per cent by CCG.

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