CHICAGO-Leo Burnett Co.'s deal to sell off its majority stake in its headquarters building here will alleviate the agency's debt and could provide the capital to make acquisitions in line with its recent restructuring plans.
Roger Haupt, Burnett vice chairman and chief administrative officer, said the deal wipes out the agency's debt, all of which is tied to the building's mortgage, which would come due in 1998.
While Burnett's future as an independent, privately held company "was never in doubt," Haupt said the real estate deal "confirms our intention to remain independent."
The agency last week said it has negotiated a deal with developer John Buck Co. and realestate company Starwood Capital Group, which will acquire majority ownership of the
8-year-old, 1.1 million-square-foot Leo Burnett Building at 35 W. Wacker. The agency occupies about half the 50-story building and will continue to do so under a new long-term lease. Terms of the deal were not disclosed, but industry estimates put the building's value at about $200 million.
Money generated from the sale will go into general funds, which Burnett also could use to cash out departing senior executives.
In March, Burnett acquired Chicago medical shop Williams-Labadie, which will be the core of one of the "mini-agencies" into which Burnett will be split. Agencies with promotions, field marketing or retailing expertise could be acquired to provide the nuclei of other sub-agencies. Burnett is also interested in expanding its promotions and direct marketing capabilities. The deal will "allow us to devote even more capital and resources to support the new agency structure," Haupt said.