Chime Communications prepares for PR MBO

Chime Communications is restructuring its PR division as the company pushes ahead with plans to sell off a chunk of its comms business.

Iraq contract: Chime has handled comms for the US government
Iraq contract: Chime has handled comms for the US government

On 14 May PRWeek revealed that Peter Bingle, chairman of Bell Pottinger Public Affairs, had left.

It is understood that there have been further headcount reductions in the public affairs business, with another six more junior members of the team also thought to have departed this week.

This accompanies further restructuring, including redundancies, in teams dealing with global government-related work, such as past work for the US government in Iraq. The changes are thought to affect Bell Pottinger Sans Frontieres and Bell Pottinger Public Advocacy.

As part of the restructure, Bell Pottinger Group deputy chairman Paul Bell is now on contract rather than being employed permanently.

All these brands are part of a Lord Bell-led management buyout (MBO), which the group last week announced was progressing towards a potential June completion.

But Lord Bell insisted the changes were not connected to the MBO. He said: 'The restructure of the overheads of the PR division of Chime is to do with current trading and forecast trading and is in no way connected to the potential management buyout.'

Chime last week said that the businesses included in MBO discussions are Bell Pottinger Sans Frontieres, Bell Pottinger Public Relations, Bell Pottinger Middle East, Bell Pottinger Public Affairs, Chime's 60% and the 40% management stake in Pelham Bell Pottinger.

Other Chime-owned PR businesses, including Good Relations, Insight, Teamspirit, Harvard and Stuart Higgins Communications expected to remain within the group.

A number of Bell Pottinger brands were not referenced – including Ptarmigan Bell Pottinger, Bell Pottinger – MMK and Bell Pottinger North, suggesting these businesses also did not form part of the planned MBO. Bell Pottinger Public Advocacy is also not specifically mentioned, though its government-focussed work is likely to be reabsorbed into the Bell Pottinger group of companies.

The businesses involved make-up under 10 per cent of 2011 group profit and the terms deal are based on last year's figures. Chime’s 2011 group operating profit stood at £31.9m, meaning the PR businesses targeted account for a maximum profit of £3.2m. Typical industry multiples would value the entire deal at between £15m and £20m, though Chime will retain a 25 per cent stake.

Most senior Bell Pottinger executives, including David Wilson, David Beck and James Henderson, are involved in the MBO. It is thought more than ten executives plan to contribute significant funds to part-finance the deal, alongside a measure of debt, and that Pelham founder Henderson would have a key role in the new partnership-based, private business.

But sources with knowledge of the deal suggested that Bell Pottinger chairman Kevin Murray was likely to stay at Chime in some capacity.

The move to press on with the sale, comes despite WPP CEO Martin Sorrell’s comments that the potential MBO represented ‘a bad deal for Chime’.

WPP owns 20% of Chime, which would need a majority of shareholders to approve the MBO. Some industry observers suggested that Sorrell’s objections were more to MBOs in general than the Chime plan specifically and, as such, doubted WPP would lead an active shareholder campaign against the plans.

It is thought many shareholders are supportive of the plans, which would see Chime become a more general comms and sports marketing orientated business. The MBO is also thought to have strong and widespread support within Chime itself, including the backing of key board-level figures.

‘Everyone wants this to happen on both sides,’ one insider said. ‘There is a certain amount of tension because no-one can imagine having to go back on the plans at this stage.’

Also read: How Chime Communications' break-up is unfolding and Danny Rogers: An intriguing future awaits Bell Pottinger

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