Cordiant Communications yesterday chipped away at its debt mountain with the sale of its German advertising business as speculation mounted that WPP was close to tabling a bid that could value the troubled advertising group at just £10m.
The company, weighed down by some £250m of debt, announced it had sold 77.3 per cent of its Scholz & Friends advertising agency to a management-led consortium for €22.4m (£15.8m). Financing was provided by Electra, the venture capital group.
The deal marks the second stage in Cordiant's disposal programme, aimed at slashing its debts, and follows the recent sale of its Australian businesses for £24.6m. A third deal - the sale of its City public relations firm Financial Dynamics to a management team backed by the private-equity group Advent - is expected shortly.
It comes as Cordiant's chief executive, David Hearn, enters the final stages of negotiating the sale of the entire company. Sources close to the talks reiterated that any offer would be pitched at a substantial discount to the group's market valuation and could be as low as 3p a share.
The talks hinge on how much debt the group's lenders, led by HSBC, would be prepared to write off. Under WPP's proposal, lenders are expected to net about 80p in the pound. Cordiant's shares, which traded at 94p less than 12 months ago, fell 1.75p to 5.25p.
The company, which is also facing an investor rebellion led by Active Value, its 14 per cent shareholder, said the sale of Scholz would not affect the operational performance of other parts of the group because Scholz was independent from its Bates network of agencies.
Scholz reported pre-tax profits of €2.8m on revenues of €61.7m last year and had net assets of €9.2m.
A WPP spokesman said the group was still conducting "due diligence to finalise our proposal for Cordiant".