Justice in an unjust world?

19 June 2003

Sir Martin Sorrell’s advertising giant has beaten Publicis’s scheme to snatch the troubled agency. In doing so, he has demonstrated that a corporate giant can beat a vulture fund at the distressed debt game.

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WPP, the advertising and marketing services group, has announced that it is to buy Cordiant, reversing an agreement earlier in the week that would have seen the advertising agency sold to WPP's peer Publicis. The deal has been unanimously recommended by Cordiant's board, who have been trying to sell the company since April when it became clear that its debts were unmanageable. It had been in talks with lenders since February in an effort to relax its lending covenants, and had also lost several major clients.

The offer would give Cordiant shareholders new shares in WPP worth about £10m. WPP is also offering to buy out Cordiant's creditors at the face value of their claims, some £256m. One creditor with a £79m claim, understood to be US hedge fund Cerberus, has declined the offer.

WPP will partly finance the offer with a £100m placing of shares. It will also benefit from some £87m of disposal proceeds which Cordiant has yet to receive from sales of businesses in Australia and Germany.

To read our story on Cerberus's veto of Cordiant's auction <a href="ve.asp?lid=1&sid=6441">click here</a>

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