WPP set to buy ailing advertising firm Cordiant

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The Independent Online

The future of the troubled advertising and marketing group Cordiant Communications looks likely to be settled this week with WPP odds-on favourite to take over the business.

Sir Martin Sorrell's media group is preparing to launch a formal offer for Cordiant, owner of the Bates Worldwide advertising agency and the City PR firm Financial Dynamics, over the coming days. The offer is expected to be pitched at a significant discount to Cordiant's current £28.7m market value and could be as low as 3p a share, or around £10m. One source said: "It's not a done deal but it is looking extremely likely. It'd be reasonable to assume something would happen in quite a short time frame."

Publicis, the French media group, is thought unlikely to succeed with its proposal - a deal under which, sources say, Cordiant could have been put into administration. "It seems WPP is the only trade buyer at the table at the moment," the source said.

Cordiant, weighed down by some £250m of debt, has been hurt as economic conditions have soured, losing several clients including Hyundai, the burger chain Wendy's and the drinks group Allied Domecq. Its shares have collapsed to the current level of 7p from the 405p they were trading at during the peak of the internet boom in the spring of 2000.

Under the terms of any offer tabled by WPP, Cordiant's lenders will be asked to take a modest cut in value on what they are owed by the group.

Speculation is mounting they might get about 80p in the pound for the £250m of debt under a WPP offer. "There'll have to be something where the banks agree to take a modest write-down in their debt," the source said.

A spokesman for WPP refused to comment other than to say: "We're continuing with the due diligence that will enable us to finalise our proposals for Cordiant." Cordiant would not be drawn either.

Other options, including a proposal to recapitalise Cordiant by its 14 per cent shareholder Active Value and an offer from the hedge fund Cerberus, are also being considered, although banks are thought to be keener on the WPP proposal.

Separately, WPP dismissed as "wholly inaccurate" reports that Sir Martin could get £45m in pay and share options if his company was taken over. Sir Martin, who invested £2m of his own money in the business in 1994 and a further $10m in 1999, is on a three-year rolling contract but also stands to benefit from a share incentive scheme which matures at the end of this year. "It's not a golden parachute at all," the spokesman said.