Arnold Courts Houston Herstek

Deal Would Give Former 3 Big Accounts, End Latter’s Cash Woes

BOSTON–Arnold Communications chairman Ed Eskandarian is in negotiations to buy troubled crosstown rival Houston Herstek Favat. Should the deal go through, Houston Herstek would be absorbed by Arnold and provide an exit for beleaguered agency founder Doug Houston.
Eskandarian confirmed the negotiations. “Any agency would like to have the terrific people, great work and excellent clients they have,” he said. Though Houston Herstek lost $100 million in billings this year when clients such as Fidelity Investments and NEC Computer Systems defected, Eskandarian apparently believes the shop still has valuable assets.
A buyout would bring to Arnold well-regarded creative directors Rich Herstek and Pete Favat, plus three sizable accounts: Converse athletic shoes and apparel, Champion International Paper and the Massachusetts Department of Public Health’s Tobacco Control Program.
Dr. Greg Connolly, who heads the Tobacco Control Program for the Bay State, however, said the client may re-evaluate the relationship should a merger occur. “We may have to take a look at the contract,” but that would not automatically put the $12 million anti-smoking account into review, he said.
Neither Houston, chairman and majority owner of Houston Herstek, nor New York financial consultant David Weiner, who is believed to be advising Houston, could be reached.
With billings estimated at $50 million, agency financial consultant Bill Montbleau of Montbleau & Associates in Burlington, Mass., said Houston could sell for as little as $1.5 million and as much as $7.5 million.
Houston’s equity stakes in Hampel/Stefanides in New York and San Francisco, and Houston Helm & Co. in Los Angeles are not part of the negotiations, sources said.
Arnold, meanwhile, remains on the block. The Wolf Group in Toronto said it has signed a letter of intent to buy Arnold [Adweek, Oct. 27]. While such a letter prevents Arnold from being sold to another suitor, it does not hamper Eskandarian from making acquisitions. –with Teresa Buyikian