Management teams at both agency networks are likely to acquire stakes in their respective companies as part of the plan.
Cordiant's media buying arm, Zenith Media, is expected to maintain some ties to Saatchi & Saatchi while severing its relationship with Bates, with which it has had a rocky relationship in the U.S.
The moves would mark the de-merging of the Cordiant empire, and could leave Bates and Saatchi as takeover targets for potential buyers ranging from True North Communications to Bozell, Jacobs, Kenyon & Eckhardt.
Cordiant is said to have rejected other scenarios, including a management buyout of Bates and a sale to True North, which is in the market for a second agency network.
Cordiant executives declined to discuss their plans.
"It is widely known that the board of Cordiant [is] considering a number of options, a number of ways of increasing shareholder value," said Alex Sandberg, chairman of College Hill, Cordiant's public relations adviser. "Within the Cordiant group, there are at least five world-class communications brands. With that number of brands, there are a number of options. The Cordiant board is determined to speed up shareholder value."
In addition to Bates, Saatchi and Zenith, those communications brands include Cliff Freeman and Partners, Team One Advertising, Rowland Worldwide, Klemtner Advertising and Siegel & Gale. Saatchi will continue to have ties with Freeman and Team One, but the fate of the other companies is unclear.
Speculation was rife in New York and London last week about the results of an April 15 Cordiant board meeting to discuss the company's options. Rumored scenarios ran the gamut from a merger between Bates and Saatchi to a spinoff of Zenith.
`EXTREMES' IN SPECULATION
"Speculation is ranging from the extremes of Bozell or True North [buying Bates] to Maurice and Charles [Saatchi] trying to buy bits back, to Zenith being floated," said one executive at a Cordiant company.
By distancing itself from Saatchi, Bates will also free itself from the Procter & Gamble Co. client-conflict policy that bars Bates from pitching for competing package goods accounts. Saatchi is a P&G*agency.
Unlike Saatchi, Bates has few clients it handles around the world since last year's loss of the $350 million M&M/Mars business, sometimes described as the glue that held the Bates network together.
Cordiant Chairman Charles Scott is not expected to leave next week, but Mr. Scott's longer-term interests are believed to lie elsewhere.
He stayed behind at Cordiant when predecessor Robert Louis-Dreyfus-who brought Mr. Scott to the group then called Saatchi & Saatchi Co. in 1989-left to run and later buy German sportswear marketer Adidas. Mr. Louis-Dreyfus has transformed Adidas into a profitable business and Mr. Scott, an early investor in Adidas, is said to be spending more time with that company.
MOVES FOLLOW FIRST PROFIT
Cordiant is believed to be acting now because the holding company last month announced its first net profit since the company plunged into financial disarray in 1988.
For 1996, Cordiant reported pre-tax profit of $67 million after a loss of $36 million the year before. Cordiant also paid its first dividend in seven years and cut average net debt to $24 million, from $190 million the previous year.
Despite being back on its feet financially, the Cordiant companies are not exactly dynamic. In 1996, revenue fell by 3.5% in North America, Cordiant's biggest market. According to Advertising Age data, Cordiant's worldwide gross income fell by 2.8% to $1.169 billion, from $1.203 billion in 1995.
BREAKUP HAS WORKED BEFORE
Breaking up part of Cordiant has worked before on a smaller scale. Within a week of buying itself back from Cordiant in fall 1995 for $27.2 million, direct marketing agency Kobs & Draft, renamed DraftDirect Worldwide, won four U.S. accounts worth $75 million in combined billings.
Taking apart the Cordiant collection of companies originally assembled by Maurice and Charles Saatchi during a 1980s acquisition spree "would be an admission that putting it together in the first place was wrong," said Alan Gottesman, managing director at West End Communications. "If they take it apart, it is because it didn't work."
Contributing: Laura Petrecca