TN to spin out multicultural agency network

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True North Communications this week likely will announce a deal - if not one speculators had been looking at.

The holding company, whose own future is in play, is expected to announce the formation of Coleman Communications Group as a new multicultural agency network, according to executives close to the company.

The new operation, to be spun out from True North's multicultural New America Strategies Group, would create a second multicultural agency network under True North that would include African-American agency Don Coleman Advertising, Southfield, Mich.; recently acquired Hispanic shop Montemayor & Asociados, San Antonio, Texas; and an unnamed Asian agency.

The New America Strategies Group, formed in 1998 as part of TN Diversified Cos., would still comprise African-American shop Stedman Graham & Partners, Chicago; Hispanic shop Siboney USA, Miami; and Asian-American agency Imada Wong Communications Group, Los Angeles.

All the shops are 49% owned by True North, except for Stedman Graham and Siboney, which are each 40% owned. Since True North owns less than half, the agencies are free to go after ad contracts set aside for minority suppliers.

In 1999, New America units had a combined gross income of $39.3 million; Don Coleman accounted for $30 million of that.

Mr. Coleman, president of his shop and CEO of New America Strategies, declined to comment. Carlos Montemayor, CEO of his shop, didn't return calls. True North declined to comment on any changes in its multicultural holdings.

Don Coleman and Montemayor share DaimlerChrysler's Chrysler Group account. Chrysler doesn't have an Asian-American agency but is considering a marketing initiative to that group later this year, a Chrysler insider said.

True North is setting up a second multicultural group to circumvent conflicts that may arise, according to an executive familiar with the plan.

True North shops already manage various rivals: Imada Wong handles AT&T Corp., for example, while Coleman and Siboney work on Verizon. Coleman and True North's Temerlin McClain handle American Airlines, while Imada Wong has Northwest Airlines.

"Whenever you have a holding company, you are bound to have conflicts," said Imada Wong President-CEO Bill Imada, adding he was unaware of plans to spin off any New America shops.

One senior True North agency executive said that having a minority stake in agencies created problems when True North was going after major new accounts. True North could have a difficult time forcing a shop in which it has a minority stake to drop an account so True North could take on a bigger rival that saw a conflict, the executive said.

That revelation appears to give credence to speculation that True North assets could be cherry-picked by suitors or that agencies in which the holding company has a minority stake could be sold off as part of, or shortly following, any merger or acquisition.

While the new Coleman Communications Group will stay under the True North banner for now, the proposed contract will give the two sides a way to part company.

It's unclear whether Coleman Communications Group has specifics rights to buy out the unit in the event True North is sold, or whether True North has already set a price for the new unit in that event.

Last month, rumors swirled that Omnicom Group's DDB Worldwide was in talks to buy Dallas shop Temerlin McClain, another TN Diversified unit that has common clients with DDB in Nortel Networks and American Airlines. Both agencies denied the buyout but confirmed a joint partnership on Nortel and possible synergies with American. The buyout talks fizzled, and it is unclear whether they've resumed, said agency executives close to the companies.

Advertising Age learned that the Coleman Communications Group deal was set to be announced in mid-January but had been postponed when Cordiant Communications Group, parent of Bates Worldwide, came close to an agreement to buy True North, parent of FCB Worldwide and Bozell Group.

The Cordiant deal didn't happen then. But other holding companies including Havas Advertising, Publicis Groupe and Interpublic Group of Cos. are said to have made overtures for True North, and speculation is rampant that some deal or deals will happen.

Contributing: Alice Z. Cuneo, Nancy Webster and Laurel Wentz

Copyright February 2001, Crain Communications Inc.

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