WPP Group plans to keep promotion network 141 Worldwide intact when it buys Cordiant Communications Group.
London-based WPP finalized its purchase agreement last week, paying a total of £266 million, about $400 million, including £256 million (about $385 million) to buy most of Cordiant’s debt.
As part of the deal, Cordiant stockholders receive £10 million (about $15 million) in WPP stock. The deal is expected to close Aug. 5.
U.S. hedge fund Cerberus Capital Management will hold on to £79 million of Cordiant debt (about $158 million); WPP reportedly continues to negotiate with Cerberus.
“The directors of Cordiant believe that Cordiant will have a sound future under the ownership of WPP,” said Cordiant CEO David Hearn in a statement. “In the light of current circumstances, Cordiant believes that this proposal provides the best outcome that is capable of being achieved for shareholders.”
Cordiant debtholder Active Value may try to derail WPP’s deal and increased its portion of Cordiant shares over the weekend, according to the Wall Street Journal. Active Value now holds 23.9% of Cordiant’s debt, up from 16.7% last week, and could veto WPP’s offer if it can get 25%. Active Value could align with another holding company, such as Grey Global Group, and force Cordiant into bankruptcy, per The Journal.
As for WPP’s plans moving forward, the agency will merge Bates advertising offices into WPP-owned offices in each city—J. Walter Thompson and Young & Rubicam in the U.S. and Red Cell in Europe. The firm has no plans to dismantle or rebrand 141, which has 91 offices in 57 countries.
WPP cited 141 as one of five reasons to buy Cordiant, since 141 complements WPP’s existing CRM, direct and interactive marketing business, most of it via Wunderman and Ogilvy One. (The other four reasons were to strengthen relationships with key multi-national clients; to expand WPP’s presence in Asia and Latin America; to extend healthcare marketing via Healthworld; and to extend brand identity work via Fitch Worldwide, per documents presented to analysts.)
WPP plans to sell Cordiant’s portion of Zenith Optimedia (co-owned with Publicis Groupe), ad shop George Patterson Bates in Australia, research firm Financial Dynamics International and German ad shop Scholz & Friends.
“The acquisition of Cordiant will make an important contribution to our long-term strategic goals, particularly in marketing services and expansion in Asia,” WPP CEO Sir Martin Sorrell said in a statement. “Given that our approach has been widely welcomed by Cordiant clients, we also believe that a merger with WPP promises both stability and opportunity to Cordiant’s clients and people.”
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