Margeotes goes north to find buyer

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MDC Communications Corp. has acquired a majority stake in Margeotes/Fertitta & Partners, New York, which will become the foundation for the company's expansion in U.S. marketing communications.

Margeotes, with more than $150 million in billings, will become a part of the communications and marketing division of MDC, a Toronto-based public company with interests in publishing and marketing.


The acquisition is part of MDC's plan to expand and spin off its communications and marketing division, said Michel Frappier, the division's president and chief operating officer. MDC expects to make an initial public offering of the division later this year or early next year, depending on market conditions, he said.

MDC and Margeotes have begun the due diligence process to close the acquisition of another New York agency that would report through Margeotes and is about the same size, said Mr. Frappier.

Margeotes President George Fertitta said the acquisition--expected to be completed in six to eight weeks--poses no conflicts with Margeotes' accounts, which include Benckiser Consumer Products, Hearst Corp., MediaOne and United Distillers & Vintners.

Mr. Frappier said MDC also has letters of intent to acquire stakes in a Westport, Conn., sales promotion agency, a Midwestern general advertising agency, a public relations agency in Boston and a corporate design company in Washington.

"Margeotes/Fertitta becomes our foundation partner from which we continue to identify new [U.S.] partners," he said.

Margeotes will stay independent and use financial and strategic backing from its new parent to expand its operations, Mr. Fertitta said.

MDC did not disclose terms of the acquisition, except to say it was within the company's strategy of taking 51% to 80% stakes. Executives close to the agency said the price was more than $20 million in cash.


MDC already owns stakes in several marketing shops in Canada, but Margeotes is only its second acquisition in the U.S.; it bought a 75% interest in Internet marketing company Cybersight in May.

MDC--a holding company with interests in printing, marketing and mail-order catalogs--is the parent of several Canadian agencies. Its agency holdings include general advertising agency Ambrose Carr Linton Carroll, Toronto; agribusiness specialist Cormack Communications, London, Ontario; healthcare agency Veritas Communications Toronto; and promotions agency Accumark, North York, Ontario.


Margeotes had received offers from several U.S. and foreign holding companies, but those would have imperiled the 25-year-old agency's independence, Mr. Fertitta said, and didn't address the desire to invest in disciplines such as promotions and interactive marketing.

MDC also won out over other offers because it was providing a succession plan to vest the next generation of management with ownership in the agency, said Mr. Fertitta. While Mr. Fertitta is the agency's sole shareholder, several other Margeotes executives are expected to benefit from MDC's stock through stock-based compensation, as well as from the future IPO.

Copyright August 1998, Crain Communications Inc.

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