Cordiant has taken action to ease its debt burden by reaching a deal to sell 70% of its Australian business for £25 million.
The Communications Group (TCG) which includes the George Patterson Bates agency will be owned 55% by funds advised by Pacific Equity Partners, with management taking a 15% stake. Cordiant will retain the remaining 30%, notably creative agency The Campaign Palace.
A deal has been on the cards for some time with Cordiant seeking to clear debts in excess of £200 million (see Cordiant Prepares To Sell Australian Assets). The company is set to make £24.6 million from the sale, after first extracting £16.5 million of surplus cash from the Australian unit. Cordiant will now look to concentrate resources on its Bates network, which accounts for 85% of group revenues (see Cordiant Revenues Dip 11% In 2002, Disposals Underway).
David Hearn, chief executive, commented: “This is a good deal for Cordiant and for the clients and employees of our Australian businesses. This transaction will allow the Bates Group to continue to service its international clients effectively whilst at the same time executing the first stage of our debt reduction programme.”
In a separate deal, Cordiant announced that it is selling its interest in Marketforce, a Western Australian ad agency, to its management. There is also speculation that it is preparing to offload UK PR firm Financial Dynamics (see Cordiant Lifted By Disposal Speculation) and the German agency Scholz & Friends (see Cordiant Contemplates Management Buyout At German Agency).
Aside from the disposal programme, Cordiant remains under pressure to restructure following a number of key account losses (see Cordiant Looks For Survival Plan) and management has been given until mid-July to come up with a survival strategy (see Cordiant Gets Breathing Space From Creditors). Nonetheless, creditors will be discomforted by reports that B&Q, Cordiant’s biggest UK client, is considering moving its £33 million account.
Cordiant’s share price was unchanged at 7.5p at 11am today.
