Is WPP close to a full buy of Rediff?

20 Mar,2014

 

By Pritha Mitra Dasgupta

 

MUMBAI: WPP may acquire the 60% stake held by Arun Nanda and Ajit Balakrishnan in Rediffusion Y&R India, said two persons with direct knowledge of the development, adding that both sides are in negotiations over a possible deal.

 

The London-based advertising and marketing communications company, which already owns 26.67% of the Indian agency, has been trying to buy out Messrs Nanda and Balakrishnan since 2002. When contacted, WPP CEO Martin Sorrell said queries about a stake purchase were speculative and therefore “there are no answers”.

 

 

Win-win for both, say industry observers

 

By A Correspondent

 

Sir Martin Sorrell is not known to lose battles with easily. So, even though he nearly tired of all attempts to buy the equity of original founders and promoters Arun Nanda and Ajit Balakrishnan, he got back at them by moving two prized clients to other entities in his empire.

 

The saga starts in 2000 when Y&R, 20 per cent co-owner of Rediffusion (along with Dentsu) from 1994, was acquired by WPP. Starting 2002, when Mr Nanda was inducted into a larger Y&R leadership council, attempts were being made to woo him and get him to part the balance 60 per cent.

 

With time, Dentsu became a passive partner, albeit a partner with 13.33% stake. The Japanese giant’s interest in a jv with Sandeep Goyal and later on its own, didn’t deter the Rediffusion interest from staying on, even as the D from Rediffusion DY&R was dropped.

 

However, when Sir Sorrell realised that Mr Nanda wasn’t going to give in easily, he gave his Indian partner the shock treatment. Prized accounts of Colgate Palmolive and Airtel moved to other WPP entities a few years back.

 

The loss of accounts coincided with a crisis in creative and business leadership in the agency has been an issue for Rediffusion. Despite a wealth of talent having worked with the flagship agency, it’s Everest,  under the baton of ex-JWT Dhunji Wadia, which has taken rapid strides.

 

Rediff-watchers believe a complete buy-out will be a win-win for all stakeholders and energies being spent for the right reasons.

 

Although the article alongside quotes an amount of Rs 150-200 crore for the stake sale, a few others with some knowledge of the development say it will be less than Rs 100 crore.

 

Guess we’ll need to wait for things to happen.

 

Arun Nanda, CMD, Rediffusion Y&R, said talks between the two companies were an ongoing process. “There has been no sale of any shares to WPP, nor any agreement to sell concluded,” he said. However, a WPP insider said David Sable, global CEO of Y&R, and Matthew Godfrey, president, Y&R Asia, helped Mr Sorrell take talks forward during their recent visit to India.

 

‘Around Rs 150-200 crore for stake’

WPP is on the verge of closing the deal, this person said. Nanda refuted speculation regarding his agency’s financial performance.

 

“We are a profitable agency, in the top 10, with good clients and strong brands. We have been profitable year on year, every single year since 1973!” he said. “We have clients in our portfolio who have been with us for 37+ years and we are not dependent on any one client.”

 

Mr Nanda’s comment was in response to some observers saying that the agency had lost some of its sheen. Based on this, one WPP executive said the price for the additional 60% stake may be about Rs 150-200 crore. This writer wasn’t able to independently verify this valuation.

 

Dentsu, which owns 13.33% of the Indian agency, said it wasn’t aware of any likely deal. “We haven’t received any official intimation on this,” said Rohit Ohri, executive chairman, Dentsu India Group.

 

Nanda also dismissed talk regarding a possible Tata group corporate pitch.

 

“The Tata group has recently asked a few global agencies (based abroad) for a presentation for their brand work outside India,” Mr Nanda said. “This assignment has nothing to do with the Indian market. Rediffusion is not involved in this pitch.”

 

Rediffusion Y&R India fully owns ad agency Everest Brand Solutions and allied businesses such as VML Qais, a digital agency, and Brand Asset Valuation. If the deal goes through, Mr Sorrell may not consolidate the businesses as he has always encouraged separate, competing brands under the WPP umbrella. However, there could be a name change to reflect any new ownership.

 

Source:The Economic Times

Copyright © 2014, Bennett, Coleman & Co. Ltd. All Rights Reserved

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