Grey’s UK media dependent, MediaCom London, is to merge with the
Media Business in a deal announced this week that will create a top ten
media agency with claimed billings of approximately pounds 333
million.
The deal, which comes after nearly a year of talks, sees MediaCom Europe
acquiring the outstanding shares in the Media Business Group in a move
that values TMBG at pounds 27.9 million. The newly merged company will
be called MediaCom TMBG and will be based in TMBG’s new offices in
London’s Gower Street.
Allan Rich, the chairman and chief executive of TMBG, will take over as
chairman and chief executive of the new company, while TMBG’s managing
director, Steve Allan, and MediaCom’s managing director, Andy
Troullides, will be joint managing directors of the new set-up. Rich and
Allan will between them take a 10 per cent stake in the enlarged
company.
Alexander Schmidt-Vogel, the chairman and chief executive of MediaCom
Europe, said: ’The merger combines two companies with complementary
strengths, a true sense of partnership and the entrepreneurial drive to
reinforce our position in the top tier in the highly competitive
European media market.’
The new operation will open for business early in the new year and will
have a client portfolio that includes MediaCom’s Procter & Gamble,
SmithKline Beecham and Mars business, and TMBG’s Book Club Associates,
Direct Line and Warner Brothers accounts.
There are a number of possible client clashes thrown up as a result of
the merger, including MediaCom’s Sun Life and TMBG’s Direct Line,
MediaCom’s Warner Brothers Films and TMBG’s Polygram Films and
MediaCom’s SmithKline Beecham and TMBG’s Roche.
Allan said there was little serious client conflict. The two companies
are talking to clients about the detail of the merger and assuring them
of continuity of service. ’It’s a big job and our priorities are our
clients and staff,’ Allan explained.
The new agency is claiming billings of almost pounds 500 million, which
would put it in third place in the league table behind Carat on last
year’s billings. However, TMBG has lost more than pounds 50 million in
business so far this year and has picked up just over pounds 12 million.
The latest figures from MMS, for the year ending September 1998, give
the two agencies combined billings of pounds 333 million.
Rich said that by pooling billings ’the merger will enhance our
negotiating power and our investment in key areas such as research, that
add value to the services we provide to our clients’. Allan added:
’We’ve harboured an ambition to be number one and that’s still our
ambition. Now we’re closer to it.’
MediaCom had been looking for a UK partner to add volume to its local
proposition. It has been slipping down the league tables and is only
just inside the Top 15, according to the latest figures from MMS.
Troullides said: ’We have been looking for a partner for growth in this
mature and competitive market. TMBG with its skills set and exceptional
market position made it an ideal choice.’
Negotiations between the two companies began early this year but were
abandoned at the beginning of October after large falls in equity
markets worldwide. TMBG’s share price had fallen to 72.5p from a high
over the past year of 136.5p. The high was sparked by TMBG’s
announcement in the spring that it was in acquisition talks, though a
statement signalling the end of talks in October sent shares
plummeting.
Now MediaCom is paying 107p per share, a 40 per cent premium on the
closing price at the beginning of this week of 76.5p.
Allan said talks had been renewed very recently and that a final
decision to push ahead with the sale was taken quickly. ’The two
companies are a good fit and meet each other’s objectives. It’s like a
relationship, you split up and then get back together and make it work
because it feels right.’
The acquisition of TMBG is the latest in a series of purchases by
MediaCom around the world, including Effcom - the largest independent
media services company in Sweden - and a new joint venture with Canada’s
Media Buying Services. MediaCom now claims global billings of more than
dollars 8 billion and has 76 offices around the world.
MAJOR CLIENTS
MEDIACOM
Bosch
Emirates
Nokia
Mars (Galaxy, M&Ms, Milky Way)
Procter & Gamble (press buying)
SmithKline Beecham
Time Warner
Warner Brothers
MEDIA BUSINESS
Book Club Associates
Direct Line
Great Universal Stores
Ikea
Mazda
Roche
Ronseal
Tomy
MEDIACOM CHRONOLOGY
1993: MediaCom launches out of Grey’s media department. Grey’s media
director, Nigel Sharrocks, takes over as chairman and Andy Troullides
joins from Burkitt Weinreich Bryant as general manager
1994: Sharrocks becomes managing director of Grey
1995: MediaCom launches as a global network
1996: MediaCom wins SmithKline Beecham’s pounds 34 million centralised
media account
1998: MediaCom Europe acquires TMBG to create pounds 333 million media
agency
TMBG CHRONOLOGY
1975: Allan Rich launches TMBG
1991: TMBG launches Bullett Media with HHCL & Partners
1993: A sale to GGT dissolves at the 11th hour
1995: 30 per cent of TMBG shares are successfully floated on the Stock
Market
1996: The Media Business North launches
1997: The Media Business Scotland launches
1998: TMBG sells to MediaCom, valued at pounds 27.9 million.
