WPP Prepares Cordiant Bid

NEW YORK WPP Group is preparing to make a bid as early as this week for troubled Cordiant Communica-
tions Group, sources said.

The British holding company, led by Sir Martin Sorrell, is set to offer about 3 pence a share for CCG’s equity and to purchase its estimated $400 million gross debt at a discount, one source said. Debt holders would have to write off anywhere from $80-250 million under the proposed plan that would score WPP assets like Bates and Fitch, sources said.

“The real bid is with the bankers to the company who are essentially in the driver’s seat,” said Anthony de Larrinaga, an analyst with SG Securities in London.

While analysts have said that bidders could get CCG for its debt, some said Sorrell is paying a nominal fee for the equity so as to not alienate CCG shareholders or prospective WPP investors. WPP’s main interest lies in CCG marketing services group 141 Worldwide, specialty unit Healthworld and some operations in Asia, Germany and Brazil, sources said.

Shares were trading on the London Stock Exchange Monday at 5.25 pence, down 1.75 percent. WPP did not immediately return calls; CCG declined comment.

Riddled with client defections over the past two years, CCG put the entire company on the block last month after losing its Allied Domecq business, worth about $30 million in revenue. WPP, as well as Publicis Groupe and Cerberus Capital Management working with Grey Global Group, have been carrying out due diligence regarding a bid for struggling CCG. Publicis Groupe, which was said to be proposing a pre-packaged administration deal last week, appears to have backed off, sources said.

CCG’s plans for a sale ran into opposition last week from one of its largest shareholders, Active Value Fund, which is pushing for the British holding company to remain independent. In response, CCG said its clients “indicated their clear preference for the Group to seek an industry partner.”

Separately, CCG reached an agreement Monday to sell its 77 percent stake in Scholz & Friends to Electra European Fund LP and the German ad network’s management. The deal, subject to shareholder approval, calls for CCG to get $26 million, which after transaction costs will be used to pay down debt. Scholz will also repay loans of about $8.7 million by Dec. 31, 2003, and will dole out an additional $1.6 million in March 2004 if certain performance goals are met.

The transaction represents the second sale in a non-core disposal program CCG instituted earlier this year. Last month, the holding company reached an agreement to sell a 70 percent stake in most of its Australian operations, including George Patterson Bates, for about $40 million. It is also nearing its third and final non-core asset sale–a management buyout deal with public relations company FD International, sources said.