Troubled Cordiant begins assets sale

Cordiant Communications started chipping away at its debt mountain yesterday by selling a 70 per cent stake in its Australian businesses, which include George Patterson Bates, for £24.6m.

The troubled advertising group, which has until July to find a buyer for the company or come up with a rescue deal after breaching its banking covenants, is also thought to be close to selling its City public relations firm, Financial Dynamics, for about £25m.

Cordiant's Australian units have been bought by their management teams and Pacific Equity Partners, a private equity group. The UK company will retain a 30 per cent stake to enable it to continue offering global coverage to its biggest clients.

Despite confirmation of the sale, Cordiant's shares dived 1.5p to 6p after it reiterated that "none of the proposals" concerning its future was "likely to result in an offer at or near the current share price". It is understood to have attracted the attention of Publicis, the French media giant. Other options include a debt-for-equity swap or an equity injection from some of the group's biggest shareholders, led by Active Value, the activist investor.

Cordiant expects to extract £16.5m surplus cash from its Australian arm, which will help reduce its £200m-plus debt pile.

David Hearn, the chief executive, said: "This transaction will allow the Bates Group to continue to service its international clients effectively whilst at the same time executing the first stage of our debt reduction programme."

Concerns one of Cordiant's biggest remaining clients was considering taking its business elsewhere also knocked the group's shares. B&Q, the do-it-yourself retailer, said it was "looking at contingencies".

The loss of Allied Domecq's business last month exacerbated Cordiant's financial woes. All eyes are on British American Tobacco, Pfizer and BSkyB to see whether they follow Allied's lead.

Cordiant is also thought to be nearing a sale of Scholz & Friends, its German marketing and communications arm.