Chime has been in talks with WPP for several months about a possible sale of HHCL to WPP, which wants the agency to form the London hub of its nascent Red Cell advertising network.
The need for the urgency follows last week's share price collapse after the admission in a trading statement that Chime's full-year results will be well below market expectations. Chime said it got it wrong when it projected that the second half of the year would be better than the first.
Shares in the company, headed by Margaret Thatcher's former PR adviser Lord Bell, dropped by over 74% to just 9p on Thursday. This morning, they were trading at 14.75p.
The talks to sell HHCL were confirmed in September when Rupert Howell resigned as joint chief executive of Chime. The addition of HHCL to WPP's fourth international network Red Cell would give it a creative agency in London. WPP recently added strengthened Red Cell with French creative agency Les Ouvriers du Paradis and last year it acquired Berlin Cameron in New York.
Howell, who leaves this month, has been replaced by Chris Satterthwaite, currently group managing director of Chime's UK businesses. Howell's departure followed that of Chime business development director Robin Price earlier this year. Price was another founder, alongside Howell, of Howell Henry Chaldecott Lury, which launched in 1987.
The deal with WPP, which already owns 20% of Chime, was initially meant to be an all-equity deal, but reports suggest Lord Bell is being urged to ask WPP Group chief executive Sir Martin Sorrell to consider making a cash offer.
Sir Martin will be reluctant to spend cash during the downturn. It has even been suggested that if Lord Bell does push for cash, Sir Martin will walk away from the deal.
HHCL has suffered a string of high-profile losses including Egg and Tango. Chime's first-half profits in September were down 42% to £5.2m, dragged down by account losses racked up by HHCL.
Chime badly needs a cash injection, as the company aims to cut costs through redundancies and restructuring businesses. It plans to merge the PR agencies QBO and Bell Pottinger Public Relations.
In its trading statement issued on Thursday, as well as admitting that it expects the "full-year outcome to be well below market expectations", it also said that it had broken banking covenants, with restructuring costs for the year set to hit £12m. However, it said that its bank continued to support the business.
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