Ailing advertising group, Cordiant Communications, is to make another disposal of its non-core assets in an attempt to lighten the load of a £200 million debt burden, ahead of a likely sale of the group. It is to sell its 77.3% stake in German advertising and marketing company, Scholz & Friends, to management and Electra European Fund.
Cordiant will net £15.8 million for Scholz and this will be put towards debt repayment. The disposal follows the sale of 70% of the group’s Australian assets for £25 million. UK PR firm, Financial Dynamics, is also expected to be relinquished very soon.
Cordiant has until 15 July before its current (extended) funding runs out. Although a definitive rescue plan is not expected to be completed by that date, the group must at least offer assurances that a plan is in place.
The group’s directors favour a buy-out of the business, saying that this is the preferred strategy of its clients. However, the Financial Times today notes that chief executive, David Hearn, and financial director, Andy Boland, have had their contracts altered to include pay-offs that are tied to the “recovery of value” they can achieve. The paper says that the contracts “raised questions about how seriously the directors would pursue options that would preserve Cordiant’s independence and perhaps enhance longer term value.”
Given Cordiant’s stated preference for a buy-out, WPP currently looks set to be leading the pack of suitors, having already confirmed that it is conducting due diligence on the group . The FT reports that formal exclusive takeover discussions could be announced as early as today.
Meanwhile, Active Venture – one of Cordiant’s key shareholders – has offered to invest around £15 million of the £30-40 million it believes is required to keep the company independent. A new management team would be put in place under Active Value’s plan.
For Cordiant to proceed with a sale of the company, realistically it first needs to complete the sale of its non-core assets, including the Scholz disposal announced today. These sales require shareholder approval. If Active Value feels that its plan to keep the company independent has not been sufficiently considered, it could, as a major shareholder, block the disposals and ruin Cordiant’s chances of attaining a buy-out, speculates the FT.
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