WPP's Sorrell to tell Cordiant shareholders: 'Accept our bid or go bust'

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Sir Martin Sorrell is this week expected to bid for Cordiant, the troubled advertising company, giving shareholders only a limited amount and requiring lenders to forgive part of its £200m of debt.

The bid from Sir Martin's advertising multinational, WPP, is likely to come within the next two weeks, but it would be lower than the current share price of 7p. It will come with a warning that the only alternative is for the advertising group to go bust.

A rival offer from French group Publicis is thought to involve Cordiant going into administration, a prospect that could untie various deals with client and employee contracts.

Another proposal comes from the hedge fund Cerberus, which owns 15 per cent of Cordiant's bank debt and 40 per cent of its bonds. Cerberus would take over part of the company and in return forgive some of the money owed.

The poor prospects for full debt repayment are likely to encourage some creditors to look at the proposal put forward by West LB, supported by activist investor Active Value, which owns 14 per cent of Cordiant. This proposal has "indicative" support from some major shareholders, who would put in up to £40m as part of a refinancing. They would carry on with the planned disposals of PR firm Financial Dynamics and advertising company Scholz & Friends, but keep the rest of the business.

The consortium will put the proposal to an extraordinary general meeting of shareholders. It would install ex-Jazz FM boss Richard Wheatley and McCann-Erickson advertising chief Ben Langdon to run the company.

As Cordiant is in breach of its loan terms, its lenders have set a deadline of 15 July to renegotiate. Any financing from shareholders would require a further extension.

West LB needs information on the current working capital position of the company, which has not been forthcoming, to finalise the structure of the proposal. However, Cordiant says it has provided all the information required by the Takeover Panel.

Despite the WestLB move, Cordiant says its clients wish for the stability of a partnership with a larger advertising group, indicating they might leave if it stayed independent.

Cordiant has already lost important clients like Allied Domecq, Wendy's and Hyundai. Its results for last year showed revenues down 11 per cent to £532m and a pre-tax loss of £228m.