After a year of trying to patch things up, True North Communications and Publicis Communication have signed an agreement allowing for the gradual dissolution of their joint operations.
The agreement paves exit ramps each company can use to begin moving clients out of the venture, executives involved in the negotiations told Advertising Age.
True North's recent acquisition of Wilkens International was the second of two triggers for the new written agreement. Acquiring Wilkens, a European network with agencies in 19 countries and billings of $750 million, gives True North a place to move the European accounts of multinational clients, including S.C. Johnson & Son, Kimberly-Clark Corp. and AT&T Corp.
"Wilkens is a good investment, first, and it's also a good insurance policy," said Bruce Mason, True North's chairman-CEO.
OPTIMISTIC FOR `PEACEFUL SOLUTION'
He declined to comment on or acknowledge the recent agreement, but said, "We're very optimistic that we'll reach a peaceful solution that works for our clients."
Publicis' most significant multinational client, Nestle, served as the first trigger for the written agreement, said executives familiar with the negotiations.
In December, after Publicis bought a local agency in Mexico and tried to move a Nestle account from FCB's Mexico City office into the local agency, Nestle wrote a letter to Publicis and True North criticizing the move.
Nestle basically said, "We decide when to move accounts, not you," according to an agency executive who saw the letter. Nestle went on to say it didn't want to be forced to play referee between the two agencies.
Galvanized, Publicis Chairman-CEO Maurice Levy and a special committee appointed last summer by True North's board to oversee dealings with Publicis hammered out the agreement and wrote back to Nestle to describe it.
Mr. Levy declined to comment on the agreement or the Nestle letter.
The agreement states that FCB and Publicis will continue to service multinational clients belonging to one another until the clients decide they want to make a switch, regardless of how weak the Publicis-True North link becomes on other levels. When and if a client does want an account moved, the agency losing the account will support the transfer of employees who want to go with it.
The joint ownership of Publicis FCB, Europe's largest agency network, will likely continue indefinitely, executives said. But with FCB's multinational clients free to leave, True North's 49% stake will probably become simply a passive investment.
The key to the agreement is that it's supportive of clients leaving or staying, executives said.
"We're keeping the clients first, as it should be, while recognizing that long term, Publicis and FCB aren't going to be partners," said one.
Neither side foresees any mass client defections in the near future. Seeking to build a global network, Publicis has recently acquired agencies in Brazil, Canada, Mexico, the Philippines and Singapore; however, it handles Nestle through FCB offices in 10 or more additional countries.
And some of Publicis' acquisitions have been small. Nestle wrote the letter about Mexico, in fact, because its local managers didn't want to move out of the FCB office there.
PARTNERS SINCE '85
Publicis and True North have been partners since 1989, when the joint venture and strategic alliance went into effect. The alliance called for the creation of a powerful global network, but neither side could agree on objectives. When Publicis unilaterally called off the alliance last year, True North at first sought to resuscitate it. But the tenor of negotiations had shifted by fall from how to keep the uneasy partners together to how to split them apart.
"We realized that we're both going to build our own networks, and neither of us is going to be particularly helpful if we're in the other's way," said one executive at the negotiating table.
True North does have operational control of certain offices in the European network. One option being considered, said executives, is taking full ownership of those in exchange for a reduced stake in the joint venture. Such a move would be driven by client needs.
Copyright February 1997, Crain Communications Inc.