WPP deal fails to sound a Chime

Sir Martin Sorrell's WPP Group may walk away from the deal to buy the HHCL advertising agency from Lord Bell's troubled public relations and marketing group, Chime Communications.

The move will add to the woes of Chime, whose shares collapsed last week when it admitted it may be breaching covenants on its £33m worth of debts. Its shares hit a low of 9p on Thursday compared with 227p two years ago.

WPP agreed to buy HHCL earlier this year in an all-share deal, which would see it merged with WPP's Red Cell international agency.

However, given Chime's current difficulties, Lord Bell is now demanding a cash element to the deal.

Sir Martin is understood to have told Lord Bell that he does not want to hand over any money and would be prepared to walk away from the transaction.

WPP owns 29.9 per cent of Chime and there had been intense speculation in the advertising industry that it might make a bid for Chime. But it is believed that this is unlikely in the current environment.

Lord Bell, who was known as Margaret Thatcher's favourite PR man, worked with Sir Martin at Saatchi & Saatchi in the 1980s.

The duo left to form their own businesses. Lord Bell set up a PR firm, now known as Bell Pottinger, and then grew the business by acquiring rivals such as Good Relations and the Quentin Bell Organisation.

WPP was created from the former maker of supermarket trolleys and bought the global advertising agencies J Walter Thompson and Ogilvy. Two years ago it purchased Young & Rubicam at the top of the market.

The advertising recession has hit both hard. WPP shares have fallen from a peak of 1,324p to just 460p on Friday.