How life proceeds at ZOG despite the travails of Cordiant

So, what do I know? In the course of speculating idly last week about the future of Media Planning Group I inadvertently forgot that ownership of Zenith Optimedia Group is no longer split equally between Publicis and Cordiant, but 75:25 in favour of the French, writes Dominic Mills.

Let's hope for better luck this week as I speculate on the future of Cordiant's 25 per cent stake in the charming acronym that is ZOG. The trigger was a headline in last Sunday's Observer -- "Cordiant in crisis talks with banks" -- which detailed the tale of yet another agency going shopping at the top of the boom only to find it has paid top dollar for everyone else's leftovers.

One of the things banks do when over-extended borrowers hit tough times is make them sell off prime

assets. A 25 per cent stake in the world's fourth-largest media buyer has the lustre of a crown jewel, certainly when you consider that its share of ZOG's profits may be one of the few bits of Cordiant's accounts that makes for cheery reading.

So does that mean 25 per cent of ZOG would fetch Cordiant a pretty price on the open market? Well, no. No one in their right mind would buy 25 per cent of something if a rival owns 75 per cent. Which makes Publicis the most likely buyer.

But is that realistic too? If buying out Cordiant was the only option on the table, then I suspect Publicis would pass on the deal: with 75 per cent it has the management control it needs. If, however, Publicis were to acquire Cordiant as a whole, then that might be different.

All of which leaves the third option that someone else will acquire the ZOG stake as part of purchase of Cordiant. Under the terms of the original deal between Publicis and Cordiant, however, that would immediately trigger Publicis' option to buy the Cordiant stake in ZOG at a minimum price of £75 million.

A fourth possibility is that Cordiant's prospects worsen significantly still, and the banks or institutional shareholders engineer a break-up on the basis that

the component parts of the group are worth more than the whole.

You'd think that, weighed down by a shareholder such as Cordiant, senior ZOG executives, at least those in the Zenith part, would be agitating for change. Such instability, you'd reason, can't be good for ZOG. The

remarkable thing in talking to them is how sanguine they are. Their reasoning is simple: with so few shared clients, and less than 5 per cent of their revenues coming from Cordiant, it's an almost total irrelevance to them.

Truth is, there's only one place the Cordiant stake in ZOG is going to, and that's Publicis. The only doubt is when. Meanwhile, the Zenith staff will have to soldier on with a shareholder holed below the waterline. Still, for those of them who've been around a while, it's just the way it used to be.

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