Just when the nearly insolvent advertising group Cordiant thought things could not get any worse, it looks like suffering the ultimate bad hair day. Procter & Gamble's €5.5bn (£4.6bn) bid for hair care group Wella looks certain to lead to the German company's £64m of advertising being removed from Cordiant.
Bankers owed £220m have given Cordiant until the middle of July to come up with a rescue plan after the decision by drinks group Allied Domecq to remove £18m of business threw Cordiant into crisis. While attention turned to whether two of its largest clients, BAT Industries and BSkyB, might jump ship, a bigger problem is looming.
P&G made an offer earlier this year for Wella. It increased the bid last month to €5.5bn and looks like being successful. The US consumer goods group famously has a dedicated roster of ad agencies which receive all its work – and Bates, Cordiant's ad agency, is not one of them. "If P&G win Wella, they'll move the account. They always do," said one senior ad industry figure.
Cordiant is already in breach of its banking covenants and came close to having its shares suspended last week. The shares closed on Friday at 14p, compared to a low of 6p earlier in the week.
The group has vowed to get its debts down from £220m to £60m. It will shortly announce the sale of Financial Dynamics, its public relations arm, to a management team for about £28m. HealthWorld, the healthcare specialist, is also likely to be up for sale.
However, the City expects a bid for the company before any other disposals can be made. Cordiant's investment banker, UBS Warburg, is understood to have been sounding out potential rivals to see if they might make a bid. WPP Group, Sir Martin Sorrell's advertising giant, is understood to have ruled itself out of the running; Havas, which was in talks with Cordiant last year, is understood not to be in a position to bid; and US giants Omnicom and Interpublic have internal problems.
The expected bidder is Publicis, the French group which owns Saatchi & Saatchi. It also has half of media buyer Zenith, with Cordiant owning the other half.
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