WPP and Y&R Back at the Table

Active Negotiations Restart on Friday; New Agreements Reached NEW YORK--Acquisition talks between WPP and Young & Rubicam Inc. resumed Friday and were progressing "diplomatically and productively," according to one executive close to the negotiations. WPP issued a statement earlier in the day--its third in two weeks--that negotiations with Y&R had resumed. The new round of discussions come after a breakdown in talks over money and control that involved testy exchanges between Y&R's Tom Bell and WPP's Martin Sorrell, sources said. Sources expected Y&R and WPP to work through the weekend in hopes of hammering out a deal. Meanwhile, a potential deal between Y&R and another suitor, Publicis S.A., seemed trickier in the face of questions over car conflicts, most notably between Ford and General Motors. Earlier last week, Publicis' board stated that it had "given a mandate to [president] Maurice Lƒvy to explore the possibility of an agreement." Y&R, meanwhile, remained mum, just a week before its annual stockholders meeting, to be held here this Friday. Adding to the theatrics surrounding the acquisition battle were reports that top Omnicom executives--Sorrell's rivals for the top spot in the worldwide agency pecking order--were "offering friendly advice" to Bell regarding his dealings with the WPP chief. Meanwhile, details about some sticking points and negotiating tactics between Y&R and WPP have emerged; last week, Bell issued an internal e-mail to employees citing issues that led to a breakdown in talks on April 29. In his e-mail, issued last Monday, Bell alluded to "several important issues" concerning how the two companies would be integrated and managed going forward, as well as how Y&R employees would be treated after the proposed merger. "Without assurances that we could properly serve our clients and support our people, we were unwilling to proceed," Bell wrote, adding, "As a result--and contrary to what you may have read--these issues never produced an agreement on the financial terms of a linkup with WPP." In addition, Bell insisted that the issue of severance agreements for senior executives was not an obstacle, despite reports to the contrary. "In fact," he added, "our senior management team was willing to forego these agreements in exchange for reasonable employment contracts from WPP." He ended the message with, "We will continue to search for the best way to fulfill our vision. Thank you all for your hard work." Sources also pointed to a non-compete clause that would apply to 49 Y&R senior executives, should they decide to leave. At first, Sorrell sought a two-year blanket clause that would prevent any of the executives from working on any brands that compete with brands handled by WPP agencies, including J. Walter Thompson and Ogilvy & Mather, sources said. Y&R countered with a less-restrictive, six-month plan that applied only to brands that competed with those handled by each executive, sources said. A compromise was struck that adopted Y&R's language but settled on one year, according to sources. Then, Sorrell's plan reappeared in a draft agreement, prompting Bell to cry foul and Sorrell to accuse him of lying, sources said. The episode, which occurred weeks before the last breakdown in talks, may have prompted Bell to explore other options, including a deal with Publicis, sources said. The alternative to WPP, however, seems less viable, owing mainly to Publicis' ties to General Motors, through the account at Publicis & Hal Riney in San Francisco. Y&R handles competitor Ford. "Ford would never tolerate Lincoln-Mercury being at an agency that's connected to General Motors," one executive source said. "They're scratching their head over [the prospect]--that's for sure." Still, other sources said Bell had already broached the topic of conflicts with Ford, suggesting that there may be a way around the problem. (Last year, in its acquisition of Rainey Kelly Campbell Roalfe, Y&R managed to establish the necessary firewalls to retain its United Airlines business outside the U.S., while Rainey Kelly held onto its Virgin Atlantic account.) Less problematic to Ford is Renault, a Publicis client, and BMW, a client of Fallon McElligott, another Publicis shop, sources said. Indeed, Ford is said to be interested in acquiring BMW. Lƒvy was traveling in the U.S. last week and did not return messages left at his New York office. As news of the dual negotiations spread through the press, Y&R staffers surfed the Web in search of the latest developments. The atmosphere at 285 Madison Ave. was one of uncertainty, with a twinge of exasperation. "The mood is--as you can imagine--not great," said one executive, noting the dirty laundry that the coverage had unearthed. "It couldn't be a bloodier press debacle." Others seemed blase« or perhaps too busy to get caught up in the buzz. "That's corporate up there," said one. "From down here, it's just business as usual." -- with Tanya Irwin

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WPP and Y&R Back at the Table

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