Osprey and SMS to merge in reverse takeover

OSPREY Communications, the struggling advertising agency, is about to become the target of a reverse takeover by SMS Communications, a privately owned rival, writes Neil Thapar.

Talks between the two sides are at an advanced stage and likely to lead to an agreement in the next few days.

SMS is controlled by Jack Rubins, former chairman of BSB Dorland, one of Saatchi & Saatchi's key agencies. The company's biggest client is BSkyB, the satellite television station, which spent about pounds 11m on a national advertising campaign last year, ranking it as the biggest advertiser in the media sector.

The discussions have come to light at a time when Osprey is struggling to reduce its estimated pounds 4m debts in a difficult trading environment. Its profits slumped from pounds 314,000 to pounds 90,000 before tax for the half-year to 30 November, on sales down from pounds 13m to pounds 10m. Bid rumours have pushed Osprey's shares from a low of 7p in January to 23.5p (up 3p yesterday), valuing it at about pounds 3.3m.

In February, the group disclosed it was examining several plans to reduce its borrowings.

The reverse takeover would be the third experienced by Osprey in the past 10 years. It was formed in 1984 after the injection of an advertising agency into Osprey Assets, an investment trust. Two years later another agency, F John French, reversed into the group.