WPP, the marketing services group headed by Martin Sorrell, is poised to bankroll the takeover of HHCL & Partners by Sir Tim Bell’s public relations group Chime Communications.
WPP is to buy a 29.9 per cent interest (the maximum holding for a minority shareholder) in Chime, worth about 15m, which will effectively finance the purchase of HHCL.
Industry sources have valued HHCL at about 20m.
On Monday, Chime confirmed to the City that it is in advanced talks over the agency and said a “trade investor” – now confirmed as WPP – was involved.
Yesterday (Tuesday) Rupert Howell, HHCL managing partner, said: “I can confirm we are in detailed negotiations but nothing is signed yet.”
The nature of the deal has been compared with Abbott Mead Vickers’ relationship with BBDO, the worldwide network that has a 27 per cent stake in the London agency. Sorrell, who has a 14.4 per cent stake in the media buying agency CIA Medianetwork, is giving HHCL the same sort of access to a global network in an effort to attract bigger PR and advertising clients with international needs.
WPP is expected to have non-executive representation on the board of the enlarged Chime, but this will not be Sorrell himself. Bell will remain as chairman of the bigger group.
Howell will become joint chief executive, together with Chime’s chief executive Piers Pottinger. But it is Howell who is widely seen within the industry as heir apparent to Bell, whose health has been erratic in recent years.
One industry source says: “Howell appears to have got himself into a public company with no real cost to himself, where he is the real successor to Bell, and with an external company with huge resources [WPP] to bankroll expansion.”
HHCL’s five partners (Howell, Adam Lury, Robin Price, Steve Henry and Axel Chaldecott) are expected to become millionaires in the deal.
Reassurances are thought to have been given by planning head Lury and creative chief Henry that they will not leave the agency for at least a year.
One of the sticking points of the negotiations is understood to be the proportion of shares or cash received by the partners.
Agency personnel were told on Monday that HHCL was still in talks with two other parties and were reassured that the agency would retain its independence, whatever the outcome. The agency has also held tentative talks with the CKS Group, a US multimedia communications group.
HHCL, famed for its zany advertising of such brands as Tango and Pot Noodle, celebrated its tenth birthday last month with a trip to Monte Carlo.