P&G hits GGT with dollars 125m US pull-out

Procter & Gamble has rocked the GGT group by pulling its business

out of the group’s flagship New York agency, Wells BDDP.

The dollars 125 million body blow will wipe 6 per cent off worldwide

revenues for the network and will slash income for Wells by 26 per cent

in the coming year.

Confirmation of P&G’s move sent GGT shares crashing 37 per cent to

pounds 1.28 on the UK stock exchange on Wednesday, and completely

overshadowed a set of positive half-yearly financial results for the

group.

P&G’s senior vice-president of advertising, Robert Wehling, said he had

pulled out of Wells because of the departure of key managers there.

Paula Forman, who had run Wells’ P&G business for several years, left

the agency in July after policy differences with its chief executive,

Frank Assumma.

Following her out the door were the executive creative director, Linda

Kaplan Thaler, and the executive vice-president director of planning,

Doug Atkin.

’We no longer felt the agency could bring the continuity and experience

needed at a critical time for key global brands like Olay and Pringles,’

Wehling said.

Of the three brands lost by Wells, Saatchi & Saatchi will pick up Oil of

Olay, which it already handles in Europe, Asia and Canada; Grey will

handle Pringles crisps; and Leo Burnett the detergent, Gain.

Michael Greenlees, chairman and chief executive of GGT, forecast that

the blow would ’significantly’ affect the group’s results next financial

year, but promised ’increased revenues and improving margins’ for the

financial year ending April 1998.

The results are the first since GGT fully incorporated the BDDP network

last April, a move first reported in Campaign (20 September 1996). It

showed a 10 per cent growth in revenues to pounds 101.2 million and a

healthy 29 per cent rise in operating profit before restructuring

costs.

Nevertheless, analysts said GGT shares were likely to remain depressed,

since Wells’ P&G business was considered the jewel in the crown of the

BDDP network.

It is also likely to heighten predatory interest in the GGT group,

especially from the former suitors of BDDP, who considered its initial

selling price too high. The P&G presence was a major barrier to Martin

Sorrell’s WPP Group, which has Unilever as a client; Grey and Omnicom

could also be interested in an acquisition.

This article was first published on Campaign