Sir Martin Sorrell's WPP was last night close to a successful resolution to its £250m battle with Publicis of France for control of the UK-based advertising group Cordiant Communications.
After a roller-coaster day of negotiations, WPP still faced intransigent opposition to its proposals from Cerberus Capital Management, the US private equity and hedge fund with a controlling interest in Cordiant's senior debt.
However, sources close to the talks said WPP had managed to reach agreement to buy out all other remaining debt holders, in effect isolating Cerberus, which had favoured the rival Publicis proposals.
The late-night resolution followed a day of high drama in which WPP and Publicis were asked to submit sealed bid proposals for the future of Cordiant. Final bids were required by 4.30pm, but Publicis missed the deadline by half an hour.
Heavy pressure had been put on both HSBC and Royal Bank of Scotland, Cordiant's two lead bankers, not to cave in what was widely seen in the City as strong arm tactics by Cerberus. The US investor had agreed to sell its debt to Publicis and was looking to become a "strategic investor" in the French group.
WPP, whose advertising agencies include Ogilvy & Mather and Young & Rubicam, trumped an earlier offer from Publicis yesterday, offering to settle £246m of Cordiant's £250m crippling debt pile. However, the French group claimed that WPP's bid carried more risk as it would need shareholder approval and may run into problems with regulators.
Publicis also maintained that its proposal to put Cordiant into administration and then immediately buy out the company's assets was the quickest and most certain way of ensuring minimum damage to the business.
Cordiant had earlier seen trading in its shares suspended at just 4.75p pending clarification of its financial position. Several of Cordiant's major advertising clients have reportedly given notice that they could leave its flagship Bates agency on fears over the financial situation. Bates' clients include Pfizer, British American Tobacco and BSkyB.
WPP and Publicis have spent days in a desperate scramble to outmanoeuvre each other in a re-run of their battle for control of the Young & Rubicam advertising agency three years ago. WPP's Sir Martin won that fight.
Under the terms of the Publicis deal the Cordiant assets would be carved up with Publicis taking the outstanding 25 per cent of the Zenith Optimedia buying agency, the Bates advertising agency and the 141 Worldwide marketing business.
Cerberus was expected to take the Fitch design operation and the 50 per cent stake in the Brazilian venture. It was expected to keep Financial Dynamics, the City public relations company. This would frustrate a buyout attempt by the company's management, which had agreed £25m of backing from Advent to fund the deal.
Publicis is the world's fourth largest advertising group after doubling its size with the acquisition of Bcom3 last year. Its portfolio includes the Saatchi & Saatchi and Leo Burnett agencies as well as 49 per cent of Bartle Bogle Hegarty. Other assets include the stake in Zenith.
WPP might face competition issues over the purchase of Bates as it is already strong in the United States. It would also face problems with Zenith as it already controls the Tempus business.Reuse content