SYDNEY: Giant UK-based communications conglomerate WPP has emerged as the favourite to acquire The Communications Group (TCG).
Today is TCG's third and, it says, final deadline for offers for the group. Failing an offer that meets TCG's expectations, the group insists it will seek a float. The message from the TCG camp has consistently pointed to WPP, US communications holding company Omnicom and Australian group Photon as having expressed interest in buying TCG. All three have reportedly seen the results of internal due diligence conducted recently and signed confidentiality agreements. Rumours TCG had rejected a bid by Photon for around $120 million, similar to WPP's first bid, were not confirmed or denied by Photon chairman Tim Hughes, who cited the confidentiality clause he had signed. Neither Omnicom nor Photon are believed to be serious bidders for TCG, however. It is WPP, which already owns 30% of the company, and its lead agency in Australia, Young & Rubicam, that is the firm favourite to acquire the group. Rumours of a merger between TCG's George Patterson Partners and Young & Rubicam are rife. Y&R CEO Hamish McLennan, when asked if this is likely to happen, said he couldn't "talk about any of it". Insiders point to the 1999 acquisition of UK agency Rainey Kelly Campbell Roalfe by Y&R as a likely scenario in Australia. Following this line of speculation, a new Australian agency could be called George Patterson Y&R. One agency executive close to TCG and McLennan claims the Y&R chief has been "sharpening his knives" for several months in anticipation of taking control of TCG and the agency where he once worked. Expect a senior staff shake-up at TCG if McLennan gains control, said the executive. A merger of Patts and Y&R would weaken the Patts brand, according to one company head. But another speculated it is a sensible move, giving Patts the global network it needs to compete for large accounts and putting Young & Rubicam Group Australia, which includes the campaign palace red cell, Sudler & Hennessy and Wunderman, on a better footing locally with STW Group and Clemenger Communications. Telstra appears to be a consideration in the manoeuvring. Both Patts and Y&R are on the four-strong roster, while Singleton Ogilvy & Mather and independent BWM make up the quartet. Photon may not be serious about its interest in TCG, but it does appear to be looking for acquisitions and BWM has been mooted as a possible target. The timing of the TCG sale comes two years after investment group Pacific Equity Partners (PEP) bought a 55% share from crashed media giant Cordiant Communications Group. TCG management bought 15% of the firm at that time, while the remaining 30% is owned by WPP. PEP has made no secret of its desire to shed its investment. Along with TCG management, it will start deciding on whether to sell or float tonight, and expects to announce its future ownership in the week beginning 15 August. The word from the TCG camp is that bids are expected from WPP, Omnicom and Photon by the close of business today. It is obviously in the interests of TCG and PEP to hype the quality and quantity of interested bidders, however, to drive their cost price up. Whatever the outcome, TCG is keen to get on with the game and return to what it does best: selling other peoples' stories, not its own.
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