EDITORIAL: City awaits Chime and WPP's move

Results from Interpublic this week underline the difficulties faced by companies across the PR and marketing sector. Income from its PR businesses - largely Weber Shandwick and Golin Harris International - are down 18 per cent on last year. The doomsayers who suggested the turnaround might be a way off are looking more prescient by the day.

To varying degrees, the UK's quoted groups are also suffering and the situation between Sir Martin Sorrell's WPP and Lord Bell's Chime Communications is largely a result of the same declining market that IPG faces.

Following Chime's profit warning last week - £12m on restructuring costs, a financial technicality and the market decline saw 75 per cent wiped off Chime's market cap in one day - the City is poised for the next dramatic twist.

Talks now appear to be fizzling out between Chime and WPP over the future of HHCL, the Chime ad agency on which WPP - which currently owns 20 per cent of Chime's equity - wishes to gain a firmer grip.

From Bell's point of view, he may need to do more than sell HHCL to turn the share price around. Since announcing it had breached banking covenants last week - the key reason the City marked Chime so far down - Bell's outfit has looked somewhat adrift, even if a rally as PRWeek went to press saw the stock climb towards 15p. This is a far cry from the 120p per share at which Sorrell sold Chime shares at the end of 2001.

Bell has been more fastidious in succession planning than most. The last 18 months have seen him both rationalise Chime's PR brands - which remain among the market leaders - and create a second tier of senior management.

He has also surrounded himself with able managers such as Kevin Murray, Piers Pottinger, Chris Satterthwaite and Trevor Morris.

But this can't mask the fact that some of the acquisitions Chime made at the top of the market, in which WPP declined to participate, have found it difficult to prosper in straightened times.

Looking forward, there are three possible scenarios to be played out.

The first is that WPP buys Chime on the cheap, despite both parties claiming this is unlikely. WPP sources indicate that 'Martin owns enough PR firms already', while those close to Bell hint that the company is not for sale, and there is no value in a hostile bid for a people business.

The second is that WPP exits a company that analysts and investors have deserted in droves, though at 15p a share WPP won't get much for its stake. The third is that both firms plod on, shrinking and smarting from what has become a bloody and fierce recession. The City is keen to see which outcome emerges.

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus

Latest Articles

John Lewis to tell brand story with "tasteful" 150th anniversary celebrations

John Lewis to tell brand story with "tasteful" 150th anniversary celebrations

Department store John Lewis is to use its 150th anniversary this year to talk about its history, which "not enough people know about", according to director of communications Peter Cross.

Labour hires Obama election strategist David Axelrod to fight General Election

Labour hires Obama election strategist David Axelrod to fight General Election

The man who helped Barack Obama win the 2008 and 2012 US presidential elections is to work for Labour along with members of his team.

Sky adds Fever PR to its roster after splitting with Cake

Sky adds Fever PR to its roster after splitting with Cake

Pay-TV giant Sky has added Fever PR to its agency line-up for a wide-ranging brief covering products and services.

Max Clifford trial jury to continue deliberations after Easter break

Max Clifford trial jury to continue deliberations after Easter break

The jury in the trial of celebrity publicist Max Clifford has been sent home for Easter and will reconvene on Tuesday for further deliberations about its verdicts on 11 charges of indecent assault.

Home Office brings in Munro & Forster to campaign against FGM

Home Office brings in Munro & Forster to campaign against FGM

The Home Office has tasked Munro & Forster (M&F) with supporting its campaign to eradicate female genital mutilation (FGM) as part of a wider retained brief.