Kellogg Co. agreed to acquire Keebler Foods Co. for about $3.6 billion in a deal that will create a food company with $10 billion in annual sales. Kellogg will pay $42 a share and assume the cookie and cracker marketer's debt. The deal, entered into with Keebler and its majority shareholder, Flowers Industries, is expected to reduce but not eliminate Kellogg's reliance on the increasingly commodity-oriented cereal business, said Credit Suisse First Boston analyst Dave Nelson. Ideally, Mr. Nelson said, the transaction would bring Keebler's strong branding skills to Kellogg, where such prowess has been lacking. Keebler spent $20 million in measured media last year on its various Keebler products, according to Competitive Media Reporting. Leo Burnett USA, Chicago, also a roster agency for Kellogg, handles advertising for Keebler. The deal is expected to close during the first quarter of 2001.
Kmart OKs TBWA shift of Route 66 to sib shop
Kmart Corp. said Oct. 25 it's satisfied with TBWA/Chiat/Day's decision to place the retailer's Route 66 private-label jeans brand at Omnicom Group sibling shop Zimmerman & Partners, Fort Lauderdale, Fla. "TBWA/Chiat/Day is our lead agency, and in that role they will be making recommendations to other Omnicom resources and help Kmart address our total communication challenges . . . We are very confident in their ability to steer us in the right direction," a Kmart spokeswoman said. TBWA/ Chiat/Day's New York office won the $100 million Kmart account on the basis of its proposals for the private-label jeans as well as overall positioning of the brand, the retailer said earlier this month. Officials at Levi Strauss & Co., however, objected, saying they had an exclusivity agreement with TBWA/Chiat/ Day, which handles Levi's out of its San Francisco office.
Expansion-minded Ikea reviews U.S., French ads
Swedish furniture retailer Ikea is reviewing its U.S. and French accounts, citing expansion plans in the two countries. U.S. incumbent Deutsch, New York, won't pitch to keep that $30 million to $35 million account, an agency spokesman said. Boston-based consultant Pile & Co. will handle the review, which Ikea hopes to complete by mid-December. An Ikea representative said the decision was mainly precipitated by plans to significantly grow the company's retail presence in North America. "We are really going into an expansion phase, and after 10 years, you have to do a thorough review of your external partners," said Ikea External Communications Manager Joakim Gip. "We probably should have done it five years ago." Another, although less significant, factor was that there had been some employee turnover at Deutsch, Mr. Gip said, though he added that the agency "did a very good job of being consistent." Deutsch handled the account for 11 years. Ikea, which has 22 retail stores in North America, plans to open at least four to five new stores a year for the next several years, Mr. Gip said. In France, Ikea has invited pitches from Paris agencies Alice, owned by Lowe Lintas & Partners Worldwide; Omnicom Group-owned BDDP & Fils and CLM/ BBDO; Havas Advertising's Enjoy Scher Lafarge; and Leagas Delaney, as well as longtime incumbent Richard Peyrat & Associes. Ikea is likely to announce a final shortlist by late this month and make a final decision by yearend. Ikea has 11 stores in France and plans to open two more annually for the next five years.
Trio of admen creates new `international' shop
A trio of high-profile international ad executives is launching an agency in London. The founders are Simon Anholt, 38, a former chairman of World Writers; Marc Cave, 35, exec VP of Lowe Group; and Joakim Jonason, 42, creative director of Swedish hot shop Paradiset DDB, which he founded 10 years ago. The new agency is to be called Cave Anholt Jonason, "at least for the time being. Once we get to know the business properly, we might decide to give it a new name," Mr. Anholt said. The agency will have a multicultural team of creatives, planners and account managers, recruited from all over the world but based in a single office in London. "Our aim is to prove that international advertising can be the most creative and most effective advertising in the world, and to provide companies with the first serious alternative to the big multinational agencies," Mr. Anholt said.
Microsoft settles FTC charges on WebTV ads
Microsoft Corp. agreed to settle Federal Trade Commission charges that 1997 and 1998 ads for WebTV via Rubin Postaer & Associates, Santa Monica, Calif., deceptively suggested WebTV could provide all the content of the Internet on a TV and didn't disclose some consumers would have to pay long-distance charges to access WebTV. The FTC said streaming video, Web sites using Java and some Web games aren't fully viewable on WebTV. Microsoft agreed to more fully disclose the differences in the future and to run consumer education ads in three national magazines, provide a pamphlet at stores, and reimburse some consumers. FCB Worldwide, San Francisco, now handles WebTV.
DirecTV unveils first TV ad from Deutsch
DirecTV on Oct. 24 broke the first TV spot in a new fourth-quarter ad and marketing blitz estimated at more than $150 million. The commercial, part of the "Feel the joy" campaign, marks the first work from Deutsch, Marina del Rey, Calif., for DirecTV as its new agency of record. DirecTV, the nation's biggest digital satellite TV programming provider, chose Deutsch in August after a lengthy review. The new 30-second spot, titled "A Big Hug," takes a lighthearted approach to how consumers feel when they first subscribe to DirecTV's 200-channel universe. In the spot, a professional installer interacts with a variety of different consumers. He rattles off all the features of the DirecTV service and moves to shake the customer's hand, when the customer hugs him instead.
Triarc completes sale of Snapple to Cadbury
Triarc Beverage Cos. last week completed its $1.45 billion sale of Snapple Beverage Group to Cadbury Schweppes, as expected. In addition to Snapple, the sale includes the soft-drink concentrate business for Royal Crown, Diet Rite and Nehi for about $910 million in cash plus the assumption of about $120 million in debt. Michael Weinstein, credited with turning around the brand that drained former parent Quaker Oats Co., will stay with Snapple.
Agency profits remain airborne in 3rd quarter
Ad agency companies are wrapping up another prosperous quarter, with double-digit gains abounding:
* True North Communications, Chicago, saw third-quarter net income spurt 33% over a year ago to $23.9 million, as revenue from commission and fee income rose 14% to $381.2 million. Organic growth during the period rose to 11.7% from 6% a year ago. Net new-business wins were $258 million in equivalent annualized billings. Year-to-date: net income up 39% to $61.1 million, revenue up 13% to $1.1 billion.
* Omnicom Group, New York, reported a 22% increase in third-quarter net income to $85.7 million. Worldwide revenue rose 20% to $1.45 billion. Year-to-date: net income up 47% to $356.6 million, revenue up 20% to $4.4 billion. That net income level was substantially bolstered by Omnicom's sale of a portion of Web design company Razorfish, for which it received $110 million.
* Interpublic Group of Cos., New York, said its net income climbed 17% to $79 million. Worldwide revenue advanced 13% to $1.3 billion in the third quarter. Domestic revenue jumped 24% to $744 million, but international grew just 5% to $576 million, due to unfavorable foreign currency translation. Year-to-date: net income up 16% to $308.9 million, revenue up 16% to $3.9 billion.
* WPP Group, London, which completed its acquisition of Young & Rubicam this month, reported revenue of $1.03 billion in the third quarter, up 21% from the same period a year ago at constant currencies. The growth was fueled by net new billings of $1.2 billion, up 14% from a year ago, along with higher media spending related to the Olympics and the U.S. elections. Year-to-date: revenue up 19%, approaching $3 billion.
* Free-standing insert giant Valassis Communications, Livonia, Mich., said third-quarter net earnings slipped 1.2% to $25.7 million on 8.8% higher revenue of $191.1 million. FSI revenue was down 0.4%, though for the nine-month period it was up 3%. Net earnings also fared better for the year to date, up 28.5% to $113.5 million; revenue rose 9.6% to $641.2 million.
* Promotional products company Halo Industries, Niles, Ill., reported a $17.6 million net loss for the third quarter, vs. a net loss of $20.6 million for the same period a year ago. Sales rose 18.9% to $175.2 million. The period represented the first full quarter that included the impact of Halo's acquisition of Starbelly.com, a business-to-business e-commerce marketer of promotional products. Year-to-date: net loss of $33.9 million, vs. a net loss of $15.5 million a year ago; sales up 10.6% to $513.9 million.