The dispute-over a small Saatchi stake in Adidas-centers on whether the money belongs entirely to the brothers and can therefore be used as part of Maurice Saatchi's war chest to fund his New Saatchi Agency. If not, Saatchi & Saatchi Co. may have at least a tenuous claim.
"We're looking into the Adidas affair," said Wendy Smyth, Saatchi's chief operating officer. "As the details of the discussions between Adidas and the Saatchi brothers were not disclosed to the [Saatchi] board ... the company is looking at the facts as it can establish them."
This is just the latest development in the soap opera that has transfixed the industry since Maurice Saatchi's ouster Dec. 16 as chairman of the agency holding company he and his brother founded 25 years ago.
In late 1992, while Mr. Louis-Dreyfus was still Saatchi chief executive, he sold the brothers an interest in the 15% stake he acquired in the ailing German sportswear group. Mr. Louis-Dreyfus left Saatchi in March 1993 to join Adidas, but remained on the Saatchi board until last month.
When the brothers made their less than $10,000 investment, they were on friendly terms with Mr. Louis-Dreyfus and were expecting Saatchi & Saatchi Advertising to pick up Adidas' $25 million international ad account from Leagas Delaney, London.
That summer, Saatchi spent about $200,000 on an elaborate pitch. But despite Maurice Saatchi leading the pitch himself, "it was awful," insiders recall. An embarrassed Mr. Louis-Dreyfus decided to retain the incumbent.
Last summer, as he and his investment group prepared to buy the remaining 85% of the now-profitable Adidas from Credit Lyonnais and other banks, the Saatchi brothers claimed to have an interest in the option for the whole company. They obtained an order in London High Court last July to stop Mr. Louis-Dreyfus from exercising the option without including them (AA, July 18).
With his option due to expire at the end of 1994, Mr. Louis-Dreyfus agreed to a $40 million settlement with the brothers. An agreement was reached in November, according to a statement issued last week by Mr. Louis-Dreyfus.
"Although the Saatchis made no significant payment for their shares, they did promise that they would provide marketing skills to Adidas," Mr. Louis-Dreyfus said in the statement. "Unfortunately, the one presentation prepared by their company, Saatchi & Saatchi PLC, was rejected by Adidas as being quite unsuitable. In those circumstances, I very strongly feel that having been offered a free lunch, the Saatchis then demanded the restaurant."
Sir Tim Bell, Mr. Saatchi's spokesman, confirmed the $40 million settlement, and said the arrangement was fully disclosed to the Saatchi board. But whether the brothers have received the money is unclear.
Sir Tim said besides the settlement, the Saatchis have combined personal wealth of about $75 million; others questioned how much of that amount was in art.
It has been common practice for the Saatchis to mix business and personal interests. The Saatchi art collection, for example, is so much an amalgam it's almost impossible to tell which works of art belong to the brothers personally.
In other developments:
The holding company named headhunter Spencer Stuart to recommend candidates for chairman in the next several weeks. One name being floated: Peter Davis, a former publishing executive.
A new holding company name-without "Saatchi," as per the board's December decision-will be announced at a shareholder meeting March 17.
Union Bank of Switzerland money management unit last week increased its stake in Saatchi from 5% to 13.6%, becoming the largest shareholder.