Disposal dents WPP debt: Sale of New York agency for pounds 37m means relief for Sorrell

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The Independent Online
WPP, the world's largest advertising agency, has sold the majority holding in its New York agency Scali McCabe Sloves in a dollars 55.5m ( pounds 37m) deal to help cut its debt mountain.

Scali, bought by The Interpublic Group, went on the market soon after it was bought by WPP as part of the acquisition of Ogilvy & Mather in 1989.

The sale relieves the pressure on Martin Sorrell, WPP's chief executive, to float the firm's market research business and sell interests in South-east Asian agencies. He would not say whether these plans were now off the agenda, but added: 'These were all either-or options, so draw your own conclusions.'

WPP owned 80 per cent of Scali, with the rest owned by its management. A spokeswoman said WPP had sold the vast bulk of its holding. The deal includes the sale of The Martin Agency, in Virginia, and subsidiaries in Canada, Mexico, Spain and France.

WPP retains its interests in Scali agencies in Holland, Germany and Brazil, and in the sales promotion subsidiary, Morton Goldberg, in New York. Scali, excluding the operations being retained by WPP, made a pre-tax loss of dollars 2.8m in 1992 on revenues of dollars 73m.

Interpublic is one of America's largest agencies, and owns Lowe Group in the US and McCann Erickson.

WPP said the deal would mean an immediate reduction in its pounds 300m debts of about pounds 22m, with another pounds 6m to come once the phased payments were completed. Debt was reduced further in March by an pounds 85m rights issue.

The company, which agreed a financial restructuring with its bankers last year, has been looking at a further attack on its debts with the possible issue of more than dollars 200m of unsecured loan notes with a seven-year maturity.

In August WPP reported that a sharp cut in interest costs and higher revenues helped boost interim profits from pounds 2m to pounds 24m.

The company, whose clients include Kelloggs and Persil, also returned to the dividend list after three years. The better than expected rise in profits was largely due to strong contributions from J Walter Thompson and Ogilvy & Mather in America and the Far East.

(Photograph omitted)

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