Active Value increases stake in fight for Cordiant Communications

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The Independent Online

Active Value Fund Managers increased its stake in Cordiant Communications again yesterday, moving closer to the level at which it could block a takeover of the debt-laden advertising group.

Active Value bought a further 2.5m shares at 2.9p, taking its stake to 24.53 per cent. This is within a whisker of the 25 per cent it needs to block a £266m takeover by WPP, the advertising giant. The rebel shareholder group declined to reveal its intentions. A spokesman said: "As and when there's anything to say, they'll say it."

WPP appeared baffled by Active Value's stakebuilding. One source close to the bid camp said: "It's all a bit sad actually. I just don't think they understand the severity of Cordiant's problems."

Cordiant has debts of £256m, plus £92m of additional liabilities. It is also liable for severe penalties for breaching its banking covenants. WPP claims to be in a strong position as it has already snapped up the debt from most of Cordiant's bondholders. It says the alternative to its proposal is for the company to be pushed into administration which would see shareholders receive nothing.

Under this scenario WPP says it would be able to buyout Cordiant's assets immediately from the administrator. It is thought WPP has already held talks with Kroll Associates, the firm of administrators which would be appointed.

WPP's advisers say Cordiant is already technically insolvent as it has breached its banking covenants. "If you can't pay your debts when they are due then you are insolvent," one said. Active Value's preferred course has been to put new management into Cordiant and refinance it. But some media experts have expressed concern about the damage that could be done to the company's client base if there is continued uncertainty about the group's future. It has already lost Allied Domecq, one of its biggest clients.

Cordiant shareholders are due to vote on a number of disposals planned by the group on 28 June. If it opts to vote against them it would shed light on its wider strategy.

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