CHICAGO-Leo Burnett Co.’s decision to sell off majority ownership of its 1.1 million-square-foot headquarters building here will allow the agency to make acquisitions in line with its recent restructuring of operations, according to sources.
Burnett, which is currently searching for an executive to oversee its promotions and direct marketing operations, is also interested in expanding those capabilities through acquisition. It has been involved in discussions with several shops in both arenas over the past year, according to agency sources.
In March, Burnett acquired Chicago medical agency Williams-Labadie, forming the core of one of the “mini-agencies” into which chairman Rick Fizdale has said Burnett will be split. Agencies with promotions, field marketing or retailing expertise could be acquired to provide the nuclei of other subagencies.
The agency last week said it had negotiated a deal with developer John Buck Co. and real estate investment company Starwood Capital Group, which will acquire majority ownership of the 8-year-old Leo Burnett Building at 35 W. Wacker. Terms of the deal were not disclosed, but real estate industry sources value the building at about $200 million.
The agency will continue to occupy about half the 50-story building under a new long-term lease.
Roger Haupt, Burnett vice chairman and chief administrative officer, said the deal wipes out the agency’s debt, which is all tied to the building mortgage loan, set to come due in 1998. While Burnett’s future as an independent, privately held company “was never in doubt,” Haupt said the debt-elimination deal “confirms our intention to remain independent.”
Capitalizing on the strength of the Chicago real estate market will “allow us to devote even more capital and resources to support the new agency structure” and help fund undisclosed “new initiatives” the agency is planning to implement globally, Haupt said.
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