The Media Business Group has ended talks about a sale to Grey,
signalling the first tangible effect of the global economic slowdown on
the advertising sector.
City analysts say advertising shares have tumbled by more than 40 per
cent since the summer and, in an statement to the City on Tuesday, the
Media Business blamed the breakdown in negotiations on ’large falls in
the equity markets worldwide’.
Paul Richards, a media analyst at Panmure Gordon, observed: ’I’m not
surprised talks have broken down because there has been such a rapid
decline in the value of quoted media stock. If you build a media
business from scratch and sell it you will hold out for price. Ad agency
stocks have fallen between 30 and 50 per cent in value.’
The Media Business Group’s share price tumbled 32.5p to 72.5p on the
A merger would have led to Grey’s media affiliate, MediaCom, ascending
the media agency ladder from ninth place into the top five. The talks
had been ongoing for more than six months and sources say an agreement
had been reached on the structure and staffing of the company, but price
remained a stumbling block.
Allan Rich, chief executive of the Media Business, said: ’We are glad
it’s out of the way because it’s been over six months. We’re looking
forward to moving into a new building and picking up where we left
Richards saw further difficulties for the UK market over the next six
months, but said the UK need not go into deep recession if interest rate
policy was used wisely.
The Chancellor Gordon Brown’s decision on Tuesday to slash his growth
forecast for the economy, however, could lead to further instability on
the stock market.
Agencies’ share prices in 1997-98
Price 52 week
AMV Group 248p 445p 248p
Aegis 77p 112.5p 57.5p
Chime Communication 40p 63p 40p
Cordiant Communication 100p 137p 88p
Media Business Group 72.5p 136.5p 70p
Saatchi & Saatchi 99p 185p 97.5p
Tempus 185p 269.5p 162.5p
WPP 218p 488p 200p