Public divorces tend to get messy. Often, the children are affected the most by the dissolution of the marriage. For example, consider the Cordiant divorce, which will be playing itself out over the coming months. Zenith Media Worldwide has been perceived of as the child of two divorcing parents, each of whom will own half of the kid. Look for that status to change.
While the fates of the Bates and Saatchi & Saatchi groups will unfold in Darwinian terms in the publicly traded universe, privately held Zenith’s future was not nearly as clearly defined.
Will two competing networks invest to the degree that will allow them to offer cutting-edge, high-tech global media services? Will they funnel business to Zenith because they want to, and not because there is a holding company mandate forcing them to? No longer able to convert Bates and Saatchi media operations to Zenith, how will the company expand in Asian or continental European markets?
‘What is difficult to grasp is there are two separate arrangements,’ Zenith chief executive officer John Perriss says. Pending Cordiant shareholder approval of the plan, Zenith will, at least initially, be jointly owned by Saatchi and Bates. The offices, however, belong to Zenith.
An eight-person board, four executive directors, including Perriss and the as yet to be hired North American chief executive officer, and four nonexecutive directors, including Bates and Saatchi representatives, will interact with the shareholders on ownership issues. Zenith will own its offices and work with clients–Bates, Saatchi or otherwise.
In the short term, Zenith’s largest current shareholders are Perriss’ biggest clients. Assuming client fallout, Saatchi and Bates have both signed contracts to keep their current business at Zenith for three years. Theoretically, Perriss explains, it behooves Bates and Saatchi to cooperate with Zenith, as they will share in its profits. Cooperation also spares them the cost of staffing up full-service media departments. Furthermore, they can also carry Zenith as a balance sheet asset.
But to achieve his goal of being the ‘best media service in the world by 2000,’ however, Perriss understands that what he needs is a new partner.
Saatchi and Bates will allow their equal holdings in Zenith, which claims to manage media billings worldwide of $6 billion in 22 countries, to be diluted. That, in turn, will open the door to an interested investor. ‘We’ll seek another partner to come in and accelerate our expansion,’ Perriss added.
Already a power to be reckoned with in England and Spain, Perriss said he would like to build his business in continental Europe (cracking the top five markets in Germany, France and Italy) and Asia, another key market. The distance from the agencies may help Zenith here too, since agency politics impacted its growth in the formative days.
No sale of any stake is impending, since Zenith, Saatchi and Bates are still disentangling themselves from real estate and staff issues. Once the ‘demerger’ is done, Perriss says Zenith will seek potential investors.
‘It will be easier to do when we are an independent, legally contracted company,’ he said.
Copyright ASM Communications, Inc. (1997) ALL RIGHTS RESERVED
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