WPP has cleared one of the last hurdles en route to the acquisition of Cordiant Communications by agreeing to buy out the outstanding debt held by a US investment fund.
The global advertising group has paid £90 million to Cerberus Capital Management, a week after offering £266 million to take control of Cordiant and its existing debts. A rival bid from Cerberus and the French ad giant Publicis proved unsuccessful.
The WPP deal still needs to be ratified by shareholders. This is by no means a foregone conclusion as leading shareholder Active Value has now increased its stake in Cordiant to more than 25%, enough to block the takeover.
The fund management group has indicated a desire to replace the existing board at Cordiant and inject up to £40 million into the ailing business. However, Active Value has lost the backing of German investment bank WestLB Panmure and there is a school of thought that it is merely strengthening its bargaining position in order to extract better terms from WPP.
Under the present deal, Cordiant’s shares are valued at just 2.4p and stakeholders will receive just £10 million. Nonetheless, the management is fully behind the takeover and is calling on investors to reject Active Value’s proposals at the emergency meeting on July 23.
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