NEW YORK: Citigate Sard Verbinnen is buying itself out of its London-based parent holding company, Huntsworth, in a deal that will total $20 million.
Huntsworth acquired Sard along with its former holding company, Incepta, last year.
Huntsworth CEO Lord Chadlington said that Sard's high rate of project business, as opposed to retainer business, made the company's profits hard to predict, and did not fit the model of the holding company.
"We like a very high level of retained income from our businesses. We have 70% of all our business on a retained basis," he said. "In the case of Sard Verbinnen, 70% of their income is project income. It's a very, very good business, but it's a different kind of business."
Chadlington also said that Sard's profits have fallen over the past three years, and that its revenues have been flat.
Next January, Sard executives will pay Huntsworth $2.5 million, and receive 51% of the company. By the end of 2009, Sard executives will pay the holding company the balance and receive the other 49%.
Chadlington said that the long-term nature of the deal will allow Huntsworth to build its existing US brands to make up for the gap that will be left with the departure of the Sard business. He cited Global Consulting Group as a key US firm that will pick up the slack after Sard is gone.
Since its acquisition of Incepta, Huntsworth has been working to divest its non-PR assets and turn itself into an entity driven purely by PR. The company noted that the sale of Sard "marks the end of the integration of Huntsworth and Incepta. There will be no further divestments other than small non-core, non-PR businesses where discussions are already in hand."
Sard president Paul Verbinnen declined to comment on his agency's differences with Huntsworth. But he said that the buyout will have "no changes" for staff or clients in the near term.
"We've always had a partnership culture. That's never really changed," said Verbinnen. "I think for the long term, this will only reinforce that."