Rediffusion-WPP. Deal Or No Deal?

27 Oct,2015

 

By A Correspondent

 

Is it a story done every year by the news media, as a senior Rediffusion Y&R executive told MxMIndia when we called her/him to verify whether WPP-Rediff was a done deal?

 

We don’t know. We aren’t sure.

 

Denials are regularly issued for many M&A deals, but then often these stories are leaked to put pressure on a company that is not buckling under.

 

Then there are also stories like the one which said that Piyush Pandey was going to join nephew Abhijit Avasthi in his start-up. Pandey has rubbished the story in his recently released ‘Pandeymonium’.

 

“In most cases, the ‘news’ is completely unfounded, even as the article carries authoritative quotes attributed to unnamed sources ‘close to the developments,” wrote Pandey as he went on to write about the speculative story on him establishing his own advertising as he turned 60 earlier this year.

 

We don’t know, We aren’t sure.

 

We can’t say that the Rediffusion deal story is unfounded.  We also ‘confirmed’ it from a couple of independent sources.

 

Btw, we also spoke to a senior functionary at the Dentsu Aegis Network in India who told us that the 13.33 percent investment is from the Dentsu HQ in Minato, Tokyo in Japan, so we should be calling some ‘San’ there and saying: “Konnichiwa”.

 

But, since we have rights to republish specific Eco Times stories, here’s what appeared this morning:

WPP to finally take control of Rediffusion; Y&R to raise stake in Arun Nanda-led agency to 86%

 

By Pritha Mitra Dasgupta

 

In 2007, Arun Nanda, who started Rediffusion in 1973, had declared, “Not now, not ever,” to an offer from Martin Sorrell, chief executive of the world’s largest advertising conglomerate WPP, to acquire a controlling stake in his agency for Rs 500 crore. But at 72, Nanda, one of the last standing independent Indian advertising warhorses, seems to have finally put his sword down in the war that Sorrell has been trying to win since 2005. The battle has now been reduced to negotiations.

 

WPP’s creative agency Young & Rubicam (Y&R), which owns 26.7 per cent in Rediffusion Y&R, is likely to raise its stake to 86 per cent in a deal staggered over the next few months. Y&R will first increase its stake to 51 per cent and gradually buy out Arun Nanda and Ajit Balakrishnan. Nanda and Balakrishnan currently own 60 per cent stake in Rediffusion Holdings Pvt Ltd.

 

It has Everest Brand Solutions, Wunderman, Sudler & Hennessey and Rediffusion-Edelman as subsidiaries.

 

The first stage of the deal – the acquisition of management control – will see Nanda and Balakrishnan take home a payout estimated to be around Rs 100 crore.

 

“Your sources may be incorrect,” wrote Sorrell in response to an email questionnaire sent by ET. A mail written to Nanda did not elicit any response. But during his recent visit to India earlier this month, Sorrell told a number of WPP group CEOs about the agreement of the deal.

 

The due diligence has already begun. According to multiple sources, while Sorrell, Nanda and Balakrishnan have the deal in principle, they will sign on the dotted line in the coming months. Once the deal is sealed, Rediffusion Y&R and its group companies will be rebranded as Y&R to reflect the new ownership.

 

While Nanda is likely to exit the creative and media business completely, he will continue to oversee the PR business, and retain a controlling stake in PR agency Rediffusion-Edelman.

 

“Of all the Rediffusion companies, it is the PR division Edelman that clocks in more than 50 per cent of the revenues…I think it will be best for Nanda to go with the Y&R offer,” said an advertising veteran aware of the deal.

 

Nanda and Balakrishnan first diluted their stake in 1994 when Dentsu Inc and Y&R, each bought 20 per cent stake in Rediffusion, which was then rebranded Rediffusion DY&R.

 

In 2000, WPP acquired Y&R. In 2004, the joint venture Dentsu-Y&R was formed in Japan, and the two agencies’ stakes in Rediffusion were redistributed as per a worldwide agreement. In India, Dentsu ended up with a 13.3 per cent stake, while Y&R held 26.7 per cent.

 

Dentsu’s 13.33 per cent stake is also likely to be transferred to Y&R, said a source familiar with the deal.

 

Source:The Economic Times

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