Bates, Saatchi & Saatchi ponder life after Cordiant

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As Bates Worldwide and Saatchi & Saatchi Advertising Worldwide prepare for their December beginnings as independent companies, each is addressing financial and client issues while watchful of their enhanced appeal to potential suitors.

Agency executives at both groups maintain neither is interested in another imminent pairing once they are separated from parent Cordiant, but that could be beyond their control--if indeed they are actually as averse to second marriages as they claim.

"They are more digestible now," said James Dougherty, analyst at Morgan Stanley, Dean Witter, Discover & Co.

London-based Cordiant last week announced its "demerger," splitting off the two agency groups and its Zenith Media unit. Zenith will be jointly owned by the publicly traded Saatchi and Bates groups.

Industry speculation is that Bozell, Jacobs, Kenyon & Eckhardt, True North Communications and Grey Advertising are all eyeing Bates, with BJK&E at the top of the list because of client needs in Asia and Europe where Bates is strong.

"Internationally, Bozell is weak, particularly in Europe, and that's where Chrysler is going," said one executive.

True North has talked with both Cordiant and Bates over the past year, but executives close to the Chicago-based holding company say the discussions cooled after its purchase of London-based European network Wilkens International.

Talk that Japan's Dentsu was interested in Saatchi & Saatchi was strongly denied last week.

"I can safely say that's not on our agenda," said a senior Dentsu executive. "I don't think it's a feasible idea" because Dentsu is in fierce competition with Saatchi in Asia.


Bob Seelert, CEO of newly named Saatchi & Saatchi Advertising Worldwide Group, denied there were any talks.

Other executives believe while Bates may be more vulnerable to a matchup, Saatchi will want to stand on its own for as long as it can.

For his part, new Bates Group CEO Michael Bungey said that while "It's no secret that people have asked about [an acquisition of] Bates . . . [But] if anyone thinks the idea is to . . . deliver [Bates] into the hands of another company, think again.

"The Bates management has wanted control for a long time," he added.

When pressed however, Mr. Bungey indicated while selling to someone was not desired, acquiring or merging could be later considerations.


Saatchi & Saatchi's Mr. Seelert sees his unit as a "strategic ideas company," comparing it to independent agency Leo Burnett Co., Chicago, another major Procter & Gamble Co. agency.

"We're not thinking about buying up a whole raft of companies and putting them under one banner," he said. "It's not desirable for Saatchi to cobble together a bunch of unlikely partners just to be bigger."

The Bates structure, he noted, is more along the lines of a "diversified marketing communications company, similar to Young & Rubicam. There's distinct positions for each" former Cordiant operation.

Mr. Seelert said Cliff Freeman & Partners and medical agency Klemtner Advertising, New York, are "lifelong components of the Saatchi & Saatchi group," but acknowledged that a spinoff of corporate identity shop Seigel & Gale is under consideration.

Currently, Saatchi & Saatchi relies on Siegel & Gale for a large part of its interactive work. However, Tony Dalton, vice chairman of Saatchi North America, is in the process of developing a new interactive unit for the group.

Since Bates was previously "precluded from competing for 10% of worldwide spending" because of conflicts with Saatchi clients such as P&G and General Mills, Mr. Bungey is making package-goods advertisers the priority as new business prospects and is assembling a task force to handle it.

"Now we're back in the game, instead of being excluded," he said.


P&G, the Saatchi client said to mostly account for the conflict problems in the past, put out a statement last week blessing the Cordiant breakup.

"From the client's point of view, we endorse Cordiant's demerger 100%," said Bob Wehling, senior VP at P&G, who is believed to have been informed of the dismantling of Cordiant the week before the announcement.

"Any move by an agency that motivates its staff better and is focused on client service can only be good news for all parties," he said.

Although executives close to P&G claim Saatchi is in some trouble with the marketer, as suggested by the agency's loss of Ivory Moisture Care to Grey Advertising, New York, in March, Mr. Seelert denied it. But he acknowledged Saatchi is trying to strengthen the relationship by having regional managers--such as Saatchi North America CEO Jennifer Laing and Asia CEO Patrick Pitcher--get more involved with the P&G business in their region.


An agency executive familiar with Bates believes the agency is already under pressure to preserve accounts since the "ad community is now targeting Bates accounts they think are vulnerable."

The breakup of Cordiant--the end result of the 1980s spending spree by brothers Charles and Maurice Saatchi--has brought all holding companies under the microscope, rightly or wrongly.

But Mr. Seelert said while the holding company raison d'etre--to allow for competing products at separate agency networks--did not work for Cordiant, "We're not trying to indict the holding company model."

"The global holding company architecture is the way to go," insisted True North Chairman-CEO Bruce Mason, who is still seeking another global agency network. "With all the consolidation that will happen in the next 2 to 2 1/2 years, there will be more holding companies. The question is who is going to acquire and who is going to be acquired."

Contributing: Rebecca A. Fannin, Pat Sloan

Copyright April 1997, Crain Communications Inc.

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