Cordiant buy fattens shop for takeover

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Cordiant's chief executive acknowledges the acquisition of Lighthouse Global Network is akin to fattening his company up for a sale.

That tracks with industry speculation that while the purchase will broaden Cordiant Communications Group's marketing services capabilities, the real motivation is to make the company a sweeter target for potential buyers.

"We are now even more attractive," said Cordiant Chief Executive Michael Bungey, "and we are very much aware that we are in the spotlight because of recent deals that have been done in a consolidating industry. Therefore, I would guess that we are more attractive and the heat will be turned up."

Cordiant, London, agreed to acquire Chicago-based Lighthouse, which itself had been on a buying binge, for $592 million in stock and debt.

The consolidation craze in the ad industry--most recently underscored by WPP Group's acquisition of Young & Rubicam and Publicis' buy of Saatchi & Saatchi--has led observers to speculate Cordiant is next in line to be bought.

Mr. Bungey didn't confirm such speculation, but he wouldn't deny it, either. "Our No. 1 priority is to build our company into being strong financially and into the shape that I feel is relevant to the year 2000," he said. "Our company is strong, and there aren't many in the same breed as us. There aren't many independents left."

Mr. Bungey denied rumblings he is already in talks with Interpublic President-Chief Operating Officer John Dooner or with executives at True North Communications. Havas Advertising also is seen as a potential suitor.

Lighthouse is a holding company run by Chairman-CEO Terence Graunke, 42, a former president of Rapp Collins, Minneapolis. In recent years, Mr. Graunke has bought and sold a series of companies, all sporting names straight out of an Eddie Bauer catalog, such as Sea Vision and Eagle River. The latter is a new-media specialist he sold to Omnicom in 1997.

Mr. Graunke "will not be part of the deal," Mr. Bungey said; he will remain at Chicago's Lake Capital Management, an investment company where he is chairman.

Lighthouse pulls together a group of 17 marketing businesses, the most prominent of which is Communicator, based in Chicago and London. Communicator specializes in marketing strategy, research and promotion. Others include London-based Financial Dynamics, an international business communications consultancy, and Fitch, a design consultancy in Columbus, Mo.

Mr. Bungey said Communicator will be merged with 141 Integrated Communications North America, a division of Bates Worldwide. Lighthouse's design and identity companies, including Fitch, will be set up as a standalone operation within Cordiant. "It will become the No. 2 design and branding business in the world," Mr. Bungey said.

Analysts said the moves track with shifts in marketing communications. "Cordiant is a very well-rounded operation," said Jim Dougherty, an analyst with Prudential Securities. They've got traditional advertising, they've got healthcare and now they've got these diversified marketing services businesses." Still, he said he believes a sale of Cordiant, most likely to Havas, "has got to be the endgame here."


Mr. Bungey also appears more receptive to finding a resolution regarding Cordiant's 50% stake in Zenith Media, which it co-owns with Saatchi. Maurice Levy, chairman-CEO of Publicis, has indicated he is eager to buy Cordiant's share; the prime issue is at what price.

"Essentially, we want to be in the media business, so thoughts of selling are not uppermost in our minds," Mr. Bungey said. "But we've always said if somebody came to us with a proposal about how we could grow our business even faster, we are certainly interested."

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