Global Giants Set to Sign Media Pact

Burnett, MacManus Link Would Eventually Extend to U.S. Market

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A formal letter of agreement has been drafted between MacManus Group and Leo Burnett Co. that would see their media units join together--in various configurations--on a global basis, according to executives in Europe familiar with the plan.

While it has been expected for a few months that the two companies would ally in Europe, the most startling development is their plan to eventually link media units in the U.S. and the rest of the world.

MERGER SPECULATION

If the agreement is signed, there's sure to be increased speculation about an eventual merger of the two companies. MacManus is the parent of global agency network D'Arcy Masius Benton & Bowles. It and Burnett both share No. 1 global advertiser Procter & Gamble Co. as a cornerstone client.

Neither MacManus Chairman-CEO Roy Bostock nor Burnett Chairman-CEO Rick Fizdale are said to have yet signed off on the alliance, and those familiar with the plans emphasize the deal could still fall apart.

The companies have hired Mercer Consulting Group, New York, to help implement the plan should it be agreed upon, executives familiar with the project said.

Burnett and DMB&B have various assignments around the globe for P&G. P&G was asked last year to give its blessing to a MacManus/Burnett media alliance, and did, the executives said.

"P&G applauded the fact that the two agencies were trying to strengthen their media units outside the U.S."

P&G had no comment.

POWERHOUSE BUILDING

Outside the U.S., the units-- MediaVest for MacManus and Starcom Media Services at Burnett--lag powerhouses such as Carat International and CIA Medianetwork.

But TeleVest, MacManus' U.S. media arm, and Starcom are powerhouses in the U.S. TeleVest has the $1 billion TV buying assignment for P&G and is the largest single buyer of national TV time. Starcom is the No. 1 buyer of magazines and outdoor, and the No. 3 buyer of Hispanic media and broadcast TV. It has P&G's $225 million print buying assignment.

P&G's $350 million U.K. media account is in review. Leo Burnett Media and Zenith Media, which split the business, will compete for the entire account.

An alliance would be implemented first in Europe, perhaps in the U.K., France or Poland, and then Latin America and Asia. The long-term blueprint under discussion calls for an alliance in the U.S. in two to three years.

"The way that might work is that a joint venture would be formed and then both Starcom and TeleVest would be run separately," said a manager close to DMB&B. "Research, systems and back-office duties, the non-conflict things, could be streamlined and shared to save money."

U.S. CONFLICTS ABOUND

While major conflicts would have to be solved in some international markets--for example, MediaVest in the U.K buys for KFC Corp. while Starcom handles McDonald's Corp.--the biggest conflicts would be in the U.S. TeleVest's U.S. clients include Burger King Corp., J.C. Penney Co. and Kraft Foods' Post cereals, while Starcom has some McDonald's and Gap Inc. buying, plus Kellogg Co.

Because of conflict issues, agency media alliances have had a hard time getting established in the U.S.

Saatchi & Saatchi's and Cordiant Communications Group's co-owned Zenith Media operates in the U.S., but Omnicom Group's Optimum Media Directions, an alliance of DDB Needham Worldwide and BBDO Worldwide, and WPP Group's MindShare, a joining of J. Walter Thompson Co. and Ogilvy & Mather Worldwide, have yet to establish U.S. beachheads.

But WPP Chief Executive Martin Sorrell said marketer pressure for global media capabilities will force alliances in the U.S. "The market will decide. It's inevitable," he said. "People who resist it will have to deal with the consequences."

Personnel issues also could be difficult and are still to be addressed by MacManus and Burnett.

The talks between MacManus and Burnett have been led by Mike Moore, exec VP-director of media development for MacManus; Kevin Malloy, exec VP-worldwide media director at DMB&B; Jack Klues, exec VP and chairman of Starcom; and Jeannie Euch, senior VP-international media director, Starcom.

Messrs. Moore and Malloy declined comment. Mr. Klues and Ms. Euch could not be reached.

Previously, MacManus and Burnett acknowledged they were talking about establishing a media alliance in Europe.

LEADERSHIP NOT SET YET

It has been suggested, said a DMB&B insider, that TeleVest President-CEO Irwin Gotlieb be chairman of the joint venture and Mr. Klues be vice chairman. This executive emphasized discussions haven't become detailed enough to discuss with Burnett names of executives to lead the venture.

The point of a Burnett/MacManus alliance is to compete globally. Executives from both companies realize that in five years, key global players in the advertising and media world likely will be Carat, Omnicom, WPP and Interpublic Group of Cos.

"Neither Burnett nor MacManus wants to become an also-ran. Clients, who are becoming increasingly global, are going to want to align themselves with strong global media players," said a worldwide media director at a competing agency.M

Contributing: Scott Donaton.

Copyright July 1998, Crain Communications Inc.

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