Cordiant's split-up plan sparks Bates takeover talk

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Cordiant's plan, announced today, to set up its two international advertising networks and their media buying arm as three independently managed businesses is already fueling speculation that at least one of the new pieces will become a takeover target.

U.K. analysts said Cordiant's Bates Worldwide network is likely to attract the interest of acquisition-minded agencies due to its strength in Asia, the world's fastest growing region for ad spending. True North Communications; Bozell, Jacobs, Kenyon & Eckhardt and even WPP Group are already being mentioned as possible buyers.

Under the plan, Bates and Saatchi & Saatchi Advertising Worldwide will each be listed on the New York and London stock exchanges, while Zenith Media Worldwide will be owned equally by both networks. The proposal by Cordiant, the world's sixth-largest ad group, will be submitted to shareholders in September, voted on in October, and go into effect, if approved, this December.

The plan will free the agencies from existing client conflicts, allowing Bates to pursue package goods accounts the network is currently barred from by Saatchi's biggest client, Procter & Gamble Co. The proposed structure would also give Zenith greater autonomy to win more business outside the Saatchi & Saatchi and Bates networks.

After meeting with Cordiant Chief Executive Bob Seelert and Chairman Charles Scott today, U.K. analysts said the "demerger" is positive but not highly significant. One described it as "a damp squib," adding: "I don't think there's any hidden value [for shareholders] that will suddenly be unleashed." Cordiant claims the proposed separation will motivate management and staff at each network and make them feel more directly accountable and responsible for the performance of their networks, leading to a higher share price.

Mr. Seelert said: "This strategy is driven by the will to serve our clients better; demerger will energize the operators in the networks and unlock the considerable potential residing in our businesses. The reaction from our major clients around the world has been enthusiastically supportive and our staff are very excited by the opportunities this move affords them."

The Saatchi & Saatchi group had a trading profit in 1996 of $37.6 million on revenue of $576 million. In addition to Saatchi & Saatchi Advertising Worldwide, the group also includes corporate communications and interactive agency Siegel & Gale and specialist services arm Facilities Group. Besides P&G, Saatchi's main clients include recently-won Delta Air Lines, Toyota Motor Corp. and Johnson & Johnson. Bob Seelert will become CEO of the Saatchi & Saatchi group.

The Bates group had a trading profit in 1996 of $39.2 million on revenue of $600 million and includes Bates Worldwide, public relations agency Rowland Group, market research company National Research Group and conference group HPICM. Bates' clients include Avis Rent a Car System, U.K.-based tobacco marketer B.A.T Industries and Warner-Lambert Co. Michael Bungey will be CEO of the Bates Group.

Mr. Scott will be non-executive chairman of both the Saatchi and Bates groups for a one-year transition period. Tim Jackson, Cordiant's investor relations director, will move to Bates. Wendy Smyth, Cordiant's chief finance officer, is deciding between a financial role at Bates or Saatchi.

Copyright April 1997, Crain Communications Inc.

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