Cordiant, which owns Bates, has confirmed it is buying an 80 per cent stake in Diamond Advertising from Seoul’s Hyundai Group. The deal effectively makes Bates the largest international player in South Korea’s advertising industry.
In 1998, Diamond ranked third with gross billings of &£170m.
About 70 per cent of its business comes from Hyundai – a factor which almost derailed the deal because the client’s businesses were unwilling to sign agreements committing them to using the agency for another five years.
Soo-Sam Chae, the agency’s president and a 30-year veteran of Hyundai’s corporate culture, persuaded the ten largest clients, which provide 90 per cent of its business, to support the deal. Among them were Hyundai Motors, a Bates client in many countries, and Hyundai Electronics.
Included in the deal is a 40 per cent stake in Diamond Bates – a separate joint venture.
A Cordiant spokesman says the deal will enable it to launch Zenith Media, 141 Worldwide (a global marketing services network) and Healthworld, Cordiant’s recently acquired healthcare marketing specialist.
Cordiant is to pay an initial &£15m, with a deferred payment due in 2001, based on the agency’s performance. On completion, net debt in Diamond is expected to be &£12m, according to Cordiant.
The deal increases the pressure on Samsung to find a buyer for Cheil Bozell now that FCB is incorporating business with that agency into its Seoul affiliate Hanin Advertising. Like Hyundai, Samsung is under government pressure to divest non-core businesses. Since Samsung’s Cheil Communications is Korea’s largest agency, the authorities want it to sell or liquidate Cheil Bozell’s remains as swiftly as possible.