Circling predators to end GGT’s dreams of empire

Two meetings in two days set the seal on Mike Greenlees’ dream of keeping the GGT agency group independent. Greenlees, group chairman and chief executive, met representatives of Omnicom’s president and ceo John Wren at a hotel near Heathrow on Sunday morning. He sat down with WPP chief executive Martin Sorrell the following afternoon.

On the table was the possibility of a deal to buy the agency for between 175m and 200m. The money was made up of at least 130m for the network and a further 45m to cover running debts. Other bidders, including Grey and Young & Rubicam, have been linked with GGT but there are only two serious players. The same players which were circling when Greenlees took over struggling French agency BDDP in September 1996 for what some regarded as an over-the-odds 105m. On this occasion, neither Y&R nor Grey is thought to be involved.

One source says the WPP effort is a counter bid, designed to make sure Omnicom has to pay more for the GGT group. The City view of an Omnicom or WPP takeover is “you buy BDDP and you get GGT free”.

Ironically, it is the BDDP deal, intended to propel GGT into a higher league, which has left Greenlees vulnerable to takeover. Procter & Gamble’s unprecedented decision last Tuesday to pull its 80m US account, including Oil of Olay (as it is branded in the US) and Pringles, out of GGT’s New York operation, Wells BDDP, effectively put the company into play.

The crisis came after months of internal clashes between Wells BDDP chief executive Frank Assumma and the team servicing the P&G account. Senior staff, including president Paula Forman, quit and 14 key agency members complained to Greenlees and P&G that they found it increasingly difficult to work with Assumma.

P&G lost its patience eight days ago and sacked Wells BDDP. The news wiped 60m off the group’s share price – the P&G account represented six per cent of total group revenue and 40 per cent of Wells BDDP billings. Its loss also disproportionately affects the group’s cashflow – P&G pays 15 per cent margins, and on time.

GGT claims the loss will cost the agency 3m this year but will not affect the London office. The City thinks a truer figure is 7m and will certainly mean that people and premises will have to go in New York. But if a takeover happens, these provisions may be unnecessary.

“We value long-term relationships, but they must be with human beings,” says P&G senior vice-president of market research and government relations Bob Wehling. “We didn’t have a critical mass of senior people anymore to sustain those relationships and to provide our brands with badly needed continuity.”

The P&G business has been split between its roster agencies in New York. Saatchi & Saatchi will handle Oil of Olay, Grey gains Pringles crisps, and Leo Burnett will handle detergent Gain.

The P&G decision came on top of the loss of BDDP GGT’s most high profile international account, Tag Heuer last December. Analysts believe other international accounts, lodged in the network’s embattled US shop, including car rental group Hertz and Heineken, are vulnerable if a deal is not struck quickly.

“GGT’s problem clearly goes back to the acquisition of BDDP,” says a senior advertising source, who has previously worked with Greenlees. “The view was that it was one deal too far – and too rich. It would only take one or two big clients to pull out for things to go wrong. That has happened. Players like Wren and Sorrell constantly had an eye on the business, waiting for such an opportunity.

“If GGT remains as a listed company it would be unacceptable for Greenlees to front it. Somebody else would have to be brought in.”

BDDP head Jean-Marie Dru denies rumours that he is going to Young & Rubicam. Jean-Claude Boulet, architect of the original BDDP international network, is a more likely casualty.

The GGT group brought its rather rosy-looking interim results forward after the P&G news broke. It reported revenues of 101m, up ten per cent on last year. At 11m, its operating profit has grown 29 per cent on 1996.

But opinion is divided on how attractive the group is. “The network contains a lot of baronies and fiefdoms, that have traditionally enjoyed a great deal of independence,” says one senior agency source. “In the light of the P&G business (loss) this structure is now perceived as a can of worms. The network is seen as a collection of agencies that were pulled together for financial reasons, and those reasons are beginning to unravel.”

Some in the City take a different view. “GGT is an attractive option to predators for two reasons,” says Panmure Gordon media analyst Lorna Tilbian. “Its P&G business was a poison pill for large players like WPP, Omnicom, and the Interpublic Group which have conflicting Gillette, Nestlé, and Lever Brothers business. Now that barrier is gone.

“The other reason is the BDDP network. Because of the financial collapse in Asia, growth for the short and medium term will come from Europe. And BDDP is one of the largest networks in Europe,” Tilbian adds.

This year in France, BDDP moved up from fourth to second in the agency rankings. In France, it has France Telecom, Danone, Elf and its European network client list includes McDonald’s and BMW.

It is this client list, which in the UK also embraces Holsten, Cadbury’s and Blockbuster, that is tempting WPP and Omnicom to offer a premium for the network.

If GGT is knocked down to Omnicom, the current favourite, the odds are it will be merged with TBWA in Europe, including the UK. It could mean a richly ironic reunion for GGT’s creative director Trevor Beattie with the network he quit last year. But there is a more pressing issue. Greenlees and Dru are integral to keeping clients locked into their network. What would they do under a new regime?

“There are an awful lot of chiefs there. Could you create a structure that will work? They would have to find a way to manage all of these powerful competing interests,” says one City analyst. “And this is where these advertising deals can often go wrong.”

A senior TBWA Simons Palmer source admits it would be “impossible” to integrate the management of TBWA Simons Palmer and GGT’s London office. But there is speculation that the London office may be kept separate if the GGT group is folded into the TBWA network.

If, on the other hand, WPP were to succeed in its overtures, the thinking is that Sorrell would run it as a separate network. Whatever the outcome, Greenlees’ dream of independence appears to be dead. He has little option but to sell.

See news story, page 12


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