Shares in Cordiant Communications, which owns the Bates agency, rose 10 per cent yesterday on speculation that the endgame for the troubled advertising group is looming.
WPP, which is scrutinising Cordiant's books, is expected to decide by the end of the week whether to trump an approach from Publicis of France by launching a formal bid.
While Publicis is understood to be working on a deal that would involve putting Cordiant into administration before picking off what it wants, any bid from WPP would "take shareholders into account", a source close to the company said.
Under Publicis's proposal, which involves it striking a deal with Cordiant's creditors, shareholders would be left with next to nothing. This would enrage investors such as Active Value, the proactive shareholder with a 14 per cent stake. Active Value, run by Julian Tregar and Brian Myerson, is believed to be working on its own proposal, which could see it inject fresh equity into Cordiant and replace its management team.
Publicis is keen to get hold of Cordiant's 25 per cent stake in Zenith Optimedia, the media buying group it co-owns with the UK group. Cordiant owns a put option, which has an exercise date of 31 December, to sell its stake to the French group for around £70m.
Cordiant, which has been hit hard by the downturn in advertising, is selling assets to cut its £200m-plus debts. Last week it disposed of its Australian operations, including the George Patterson Bates agency for £24.6m. It is close to selling its City public relations firm Financial Dynamics for £25m. It has lost a number of key clients, including Allied Domecq, the Royal Mail and Hyundai Motor.
Analysts reckon that prospective buyers are better off waiting for Cordiant to collapse into administration in July when the current lifeline with its bankers expires, than risk bidding now.
Cordiant is thought to have agreed a paydeal for executives David Hearn and Andy Boland that could net them a £1m bonus in the event of a sale.