Bell sells half of HHCL to WPP for £4m in cash

Chime Communications chairman Lord Bell this week announced a deal to sell 49 per cent of troubled ad agency HHCL to rival marketing services group WPP.

According to Bell, the deal - under negotiation for the last four months - will free up management time to concentrate on the company's PR firms, which include the Bell Pottinger and Good Relations brands.

The deal with WPP chief executive Sir Martin Sorrell values the former darling of the ad sector at just £8m. Chime will receive £3.5m on completion next month and a further £500,000 if revenue targets are hit this year.

This represents a multiple of eight over the last reported pre-tax profit, for 2001.

Significantly, this has been secured in cash rather than WPP stock and will help Chime pare down its painful £32m debt pile. Its overdraft facility remains at £40m, of which £29m will now be in use.

Chime paid £25m to acquire HHCL in 1997. The profits taken out since that deal, together with Chime's remaining stake, mean that deal has so far proved value neutral.

But Bell stressed that the partial disposal leaves Chime with the possibility to derive further value from the firm as it beds into WPP's Red Cell network.

Under the terms of the deal, Chime has an option to sell WPP the remaining 51 per cent of HHCL for two years from next January on the same terms as the first tranche was sold this week.

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