Cordiant plans rights issue

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The Independent Online

Media Editor

Cordiant, the holding company that owns Saatchi & Saatchi, confirmed yesterday that a rights issue was "imminent" and was "a top priority" for the struggling advertising group.

But insiders insisted that no terms had yet been agreed on the size and structure of the issue, signalling that estimates that they would seek to raise as much as pounds 133m were too high.

"It is too early to say what the share-to-share ratio will be," a spokesman said. "Therefore, the amounts are not set."

Shares in the company closed unchanged yesterday at 84p, hovering just above their peak for the year. Analysts said they expected few share price movements until further news of the size and pricing of the rights issue was available.

The newly named chief executive, Bob Seleert, is to exchange his bonus for shares in the issue, to underscore his commitment to the company. It is believed other senior executives will follow suit.

Cordiant, whose name was changed from Saatchi & Saatchi earlier this year, has been suffering ever since the departure of co-founder Maurice Saatchi late last year. The defection of several key clients early in 1995, including Mars, the confectioner, and British Airways, helped to drive earnings down, culminating in a loss of nearly pounds 30m in the first half of the year.

The current management, led by chairman Charlie Scott and Mr Seelert, are looking at ways of cutting costs and winning new business.

An injection of fresh equity is believed to be crucial to confirm a recovery in time to benefit from a more buoyant advertising market in 1996. Elections next year in the US and Britain are expected to lead to a looser monetary policy, bolstering consumer confidence and sparking an increase in advertising spend.

David Herro, the controversial fund manager who sparked a boardroom battle last year over Mr Saatchi's pay, is to take up a full complement of shares under the rights issue. His fund now owns just under 10 per cent of Cordiant. Other institutional investors are expected to follow suit.