An allied assault to weaken Cordiant?

It would be no surprise to find Colin Hearn, worldwide head of Cordiant Communications’ direct and interactive operations, shortly following Peter Stead, chief executive of Fitch, its design division, to the exit – P45 in hand.

Not that Hearn – who should not be confused with his namesake David, Cordiant’s chief executive – has done a bad job. On the contrary, it can be surmised that he was pivotal in keeping Cordiant afloat as more and more leaks sprang in the rotting hulk. Now that the hulk is foundering, it looks as if Hearn has left it too late to jump ship.

141 Communications, which Hearn heads, is critical to Cordiant – first because it enjoys a well-deserved reputation in what used to be called ‘below-the-line’, and second because it houses the bulk of Cordiant’s two remaining core international clients: British American Tobacco and Allied Domecq. With the peremptory (and curiously timed) decision of Allied to defect, 141 has had its heart ripped out. The question now must be: will BAT follow suit, and effectively drop the final curtain on Cordiant?

Being no fool, Hearn had evidently foreseen this possibility and quietly engaged in negotiations with at least one rival marketing services group. BAT seems to have been mildly supportive, but there are indications that Allied scuppered the plan over fears of client conflict. However, BAT had other options (to remaining loyal, that is). It could, for instance, surreptitiously reweight spend among its three global roster groups, Cordiant, WPP Group and Grey. Spookily enough, this is exactly what happened recently, when Lucky Strike, arguably BAT’s biggest brand, moved out of Bates (Cordiant) and into Grey; while Pall Mall, at Grey, shifted to Ogilvy (WPP). Bates received airports and duty free as what appears to be a consolation prize.

BAT can hardly be faulted for wishing to act prudently in its corporate interest. After all, Allied was doing no less when it stated that concern over Cordiant’s financial viability, rather than any quarrel with creative treatment, had spurred its bombshell decision to depart. What’s rum is not Allied’s decision, but its timing. It could not have been more damaging, or critical, to the network’s future – breaking as it did when Cordiant was poised to announce a successfully renegotiated debt schedule. The result has been a freefall in the share price and open speculation, even among investors, that the company is finished.

The brutality of the timing – which admittedly stretches coincidence – is being seen by conspiracy theorists as part of a break-up plot. Though there are a number of shadowy candidates, the finger points most readily at Publicis which, as we now learn, has picked up the Allied account. As the winning network, it might reasonably be expected to have some control over the timing of an announcement. It is also widely known that Publicis has first refusal over Cordiant’s 25 per cent share of Zenith Optimedia – the only bit it does not already own – and consequently there is speculation that it is strengthening its negotiating position. A problem with this theory is that the &£75m ‘put’ option does not appear to be financially negotiable.

No doubt Publicis has some interest in a break-up or even a knock-down acquisition, but so do many others. Cordiant chief executive David Hearn has little alternative but to ask for share dealings to be suspended this week. It will at least give a little more time to negotiate the most favourable terms for that break-up.

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