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NOT JUST A NAME CHANGE SAATCHI BECOMES CORDIANT, MINUS CME KHBB NETWORK

By Published on .

LONDON- Saatchi & Saatchi Co. has smoothly changed over into Cordiant, but it won't be the three-network holding company that Saatchi has been.

CME KHBB, the fledgling third agency network that the company has tried to develop for the past two years, is being quietly dismantled, leaving Saatchi & Saatchi Advertising Worldwide and Bates Worldwide as Cordiant's two networks.

CME KHBB's failure paves the way for a likely sale or management buyout of the U.S. partner, Minneapolis-based Campbell Mithun Esty, to solve a conflict between CME's recently won DowBrands household products business and conflict-conscious Procter & Gamble Co. at Saatchi & Saatchi Advertising Worldwide.

Interpublic Group of Cos.; Bozell, Jacobs, Kenyon & Eckhardt; Omnicom Group; and True North Communications are all believed to have shown interest in CME. Bozell flatly denied it, and a spokesman for True North said that company "has talked to CME along the way, but nothing has come from those talks."

An Interpublic executive acknowledged the network had also spoken to Saatchi a month ago about a deal, but indicated no agreement was reached. Omnicom said it wasn't interested.

CME and London agency KHBB got together in late 1992 to set up what Saatchi described as "a hub and spoke" network with small offices in key cities around the world.

"We had this idea clients would be interested in centers of excellence, a hub and spoke," said Charlie Scott, Cordiant's chief executive. Mr. Scott championed the concept as an economical way to provide high-quality creative work until it became clear after two years that few clients bought into the idea.

So CME KHBB is closing its half-dozen tiny offices in continental Europe. Those shops were staffed by about 22 people, with some now moving to Bates.

Luc Lemaire, CME KHBB's Paris-based general manager for financial affairs, attributed the network's downfall partly to CME's U.S. clients not using the network in Europe as hoped, especially after CME lost its Chrysler Corp. and Texaco business in the U.S.

London-based KHBB, a $140 million agency on its own, is talking to Cordiant about doing a partial management buyout; Cordiant would keep a stake in KHBB and the agency would continue to use group services like media buying.

Meanwhile, at last week's Saatchi shareholder meeting, it was hard to tell who shareholders hated most: ousted Chairman Maurice Saatchi or David Herro, the U.S. fund manager who led the revolt against him.

By the end of the question-and-answer period, Mr. Scott wasn't too popular either. Shareholders easily OK'd the name change and new share option plan for executives, but complained about everything from the new Cordiant name, which one shareholder said sounded "like a vacuum cleaner company," to the company's low share price.

Shareholders were particularly concerned about the mounting cost of the company's lawsuits against Maurice and Charles Saatchi and three other former Saatchi executives.

In a gaffe typical of the company's frequent public relations blunders, Mr. Scott repeatedly refused to even discuss the charges against Mr. Saatchi, even though they're documented by legal writs that are in the public domain. After consulting his legal adviser several times, Mr. Scott angered shareholders by advising them to go to court and look up the writs for themselves.

Contributing to this story: Bruce Crumley in Paris, Iris Cohen Selinger and Pat Sloan in New York, and Jeanne Whalen in Chicago.

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