Zenith in spat with parent Saatchi

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Top executives at Zenith Media and co-owner Cordiant Communications Group are talking to lawyers to determine whether Saatchi & Saatchi, the other co-owner, has broken its contract with them.

If it has, according to the terms of the original contract, Saatchi could be forced to sell its half of the company for 1 pound sterling, or $1.43, according to an executive close to the situation who asked not to be identified.


"We believe there may have been a material breach of our media services agreement," said John Perriss, CEO of Zenith Media Worldwide. "We have a legal obligation as directors of the company to enforce the contract. We have a duty to do this."

Mr. Perriss said his lawyers requested he not discuss the matter any further. But a spokesman for Cordiant CEO Michael Bungey denied Cordiant was pursuing an inquiry into the matter. "Nothing at all is going on," the spokesman said.

Maurice Levy, chairman of Publicis, the new parent of Saatchi & Saatchi, did not return a call for comment; a spokesman for Saatchi & Saatchi declined comment.

Others close to the parties said Cordiant and Zenith are indeed pursuing the matter, and Mr. Bungey himself has drafted a letter to Mr. Levy about the situation.

The turmoil began after it was reported that Publicis was shifting the $200 million global media account for Hewlett-Packard Co., a Zenith client, to Publicis' media arm, Optimedia (AA, Oct. 23). The media account had been split among six different international networks, including Optimedia and Zenith, which together handled the lion's share of the work.

Mr. Levy approached executives at Zenith and Cordiant two weeks ago to warn them of the account move, said an executive familiar with the situation. At that time, Mr. Levy was informed by Zenith executives that the account shift might breach a media services agreement that had been crafted in 1997 by Cordiant, Saatchi and Zenith.

The media services agreement followed the demerger of Saatchi from Cordiant and the subsequent split in Zenith's ownership. According to the terms of the media agreement, the brand agencies are legally required to place all their media buying with Zenith, according to the executive close to the situation, who also provided the details below.

The only way in which Zenith can be denied a piece of media business that originated at the brand agencies is if the client goes into review and/or delivers an unsolicited letter requesting their media business be shifted. The other alternative is for either agency to give up its stake in Zenith by selling it to the other owner.


In addition, if a breach of the contract is proved in this particular case, Cordiant will be entitled to acquire all of Publicis' shares in Zenith based on its net asset value or 1 pound sterling, whichever is greater. Zenith's net asset value currently is minus 23 million pounds, according to the London exchange. If the case were proven, Cordiant would thus be entitled to purchase 50% of Zenith for 1 pound. Also, according to the terms of the contract, if there is a breach it is incumbent upon Cordiant to remedy the matter, not Zenith Media.

"While we are employed as directors of this company, I have to defend its interests," said Mr. Perriss. "What we would like is this to be remedied."

Contributing: Anne-Marie Crawford

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