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(April 5, 2001) -- Envoy Communications' acquisition of London-based agency group Leagas Delaney, which was scheduled to close at the end of last month, has been at least temporarily halted by Leagas Delaney's slide.

Leagas Delaney laid off half of its 87-person staff in its dot-com-dependent San Francisco office in February after its Internet clients cut spending or went bust. The deal, originally to close in January for a part-stock purchase price of $85 million, was first postponed because Envoy's $8 share price fell by half.

Geoff Genovese, president-CEO of Toronto-based Envoy, said, "What we have to do is look at how much [Leagas Delaney] is going to make this year and its potential for 2002, taking into account both a fair price for our own stock and the fair value of Leagas Delaney business with its recent cutbacks in the San Francisco office and interactive division."

Mr. Genovese said that the two companies are "in constant talks" and that the previously agreed $85 million purchase price now looked optimistic.

"For Leagas Delaney to get that amount, it would have taken four years with the agency doubling its business every year over that period," he said. "But given the current situation and economic climate, obviously we have to revise our thinking. We don't want it to drag on any longer, but we have to find the win-win situation for both sides."

He said he expects the deal to be resolved -- or abandoned -- within two or three weeks. -- Gail Chiasson

Copyright April 2001, Crain Communications Inc.

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