LONDON (AdAge.com) -- Cordiant Communications shareholders today approved WPP Group's bid to buy the troubled advertising company, while also voting three top executives, including Cordiant's chairman, off its board of directors.
At a meeting today, 99.17% of shareholders approved the deal,
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The deal is expected to close Aug. 1.
$17 million deal
WPP last month agreed to give Cordiant shareholders one new WPP share for every 205 Cordiant shares, a deal worth just $17 million based on WPP's stock price. Cordiant's board, faced with heavy debt load and limited prospects, accepted that small shareholder payout after WPP agreed to buy all of Cordiant's debt.
But the fund managers at Active Value continued to insist at today's meeting that WPP's deal did not represent the best value for shareholders and said they are exploring legal action to secure compensation for the "destruction of value" of Cordiant shares.
After the WPP bid was accepted, Active Value then led the voting to remove Cordiant CEO David Hearn, finance director Andrew Boland and Chairman Nigel Stapleton from the board. Mr. Stapleton will be replaced as chairman on an interim basis by Rolf Stomberg. Messrs. Hearn and Boland lost their seats on the board but retain their management positions.
'Disgraceful bonuses and payoffs'
Before the vote, Brian Myerson, Active Value's joint managing director, dramatically took the stage and said, "Shareholders cannot endorse such appalling corporate governance" and asked shareholders to "remove the three as a public protest against their disgraceful bonuses and payoffs."
Mr. Stapleton loses a $320,000 bonus but Mr. Hearn and Mr. Boland will still receive payments of $2.4 million and $1.28 million, respectively.
Their contracts were changed in May to focus on safeguarding the company's value rather than meeting profit targets. Dudley Fishburn, chairman of Cordiant's remuneration committee, told shareholders that the bonuses were increased "to hold them in position at the request of lenders."
But Mr. Myerson called on each of the three ousted board members to defend their "rewards for failure." Mr. Hearn protested, saying he had spent the last four months away from his family, working seven days a week.
Active Value -- which manages $700 million on behalf of clients including the California State pension fund -- spent $56 million to acquire its Cordiant shares and now faces a loss of $50 million.
Active Value has been a thorn in the side of WPP Chief Executive Martin Sorrel during the Cordiant takeover battle, but ultimately failed to present any alternative to the WPP offer. Its overtures to Publicis Groupe fell apart, and an earlier move to refinance Cordiant and replace the board with alternative directors also hit the rocks.
Pursuing legal action
The investment firm, which claims to have the concerns of all Cordiant's shareholders at heart, said that it is pursuing legal action against the board and Cordiant's adviser, UBS Warburg, in an attempt to secure compensation for the "destruction of value" of Cordiant shares.