CIA vulnerable to takeover as rival buys stake

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The Independent Online
CIA Group, the media buying network, looked increasingly vulnerable to a takeover bid yesterday after WPP Group, the world's largest advertising and marketing conglomerate, paid pounds 10.2m for a 14.4 per cent stake in the company.

WPP bought Blugroup Holding, which is wholly owned by CIA Group's former vice-chairman, Marco Benatti. Mr Benatti said at the end of last year that he would sell his stake "for personal reasons".

While the sale of Mr Benatti's 6 million shares was widely expected, and is believed to have followed disagreements on international strategy, the identity of the buyer took the industry and CIA by surprise. WPP's purchase was seen by some observers as a launch-pad for a full bid, despite the company's claims that it was an investment.

It is understood WPP would be prevented from launching a bid within 12 months under the terms of the agreement with Blugroup. WPP would pay Blugroup an additional pounds 3.3m if, within that period, a bidder paid up to a maximum of 225p per share for CIA. WPP paid 170.5p for Mr Benatti's stake, compared to yesterday's closing price of 174.5p, up 14.5p.

CIA's executive chairman, Chris Ingram, reacted defensively to the news. "We've been independent for 21 years and we like it that way," he said. He added it was not a problem "as long as it remained an investment".

WPP's move increases the pressure on CIA to form strategic partnerships with major players if it is to retain its independence. Mr Ingram said only last month that he had set his sights on expanding in the US, and wanted to be one of the top six media buying points in the world by 2001.

Martin Sorrell, WPP's chief executive, is a firm believer that the media buying industry must mirror rapid consolidation among media owners. It is highly likely that his network will play a high-profile role in future rationalisation.

Some analysts interpreted the news as a signal to WPP's agency networks, J Walter Thompson and Ogilvy & Mather, to speed up integration of their own media buying and planning facilities. Mr Sorrell has been keen to establish greater co-operation between the two agencies, and senior executives are working on plans to merge the media departments at JWT and O&M.

One analyst said buying a significant share of CIA indicated to staff at JWT and O&M that Mr Sorrell could achieve his media buying ambitions by looking outside WPP. The analyst said: "Mr Sorrell has been closely focused on improving the co-ordination of media services in WPP Group. This sends warning shots across the bows internally."

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