MEDIA: Perspective - 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.

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


Still, for those of them who've been around a while, it's just the way

it used to be.

Claire Beale is on maternity leave.


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