AVA’s Cordiant Stake-Building Blew £32m of Investors’ Funds

28 July 2003

The ad world, analysts and media alike have for weeks scratched their heads in perplexity as they tried to figure out the cunning game plan pursued by Active Value Advisors.

Clearly AVA’s controlling duo, Brian Myerson and Julian Treger, were intellectual atavars whose prescience and perspicacity were on a plane far above ordinary mortals. Why else would the South African wunderkinder continue to build their stake in Cordiant Communications at a share price higher than that offered by WPP Group and accepted by Cordiant’s board?

But as last week morphed into the weekend, the pair’s omniscient image shattered. Their continued buying of Cordiant shares up to and beyond the 25% stake needed to scupper WPP’s offer turned out to be a monumental losing gamble with other people’s money.

AVA’s investors will take scant consolation from the meagre £3m payout by WPP in return for the £35 million ($51.75m; €44.96m) invested by AVA in Cordiant shares.

Treger was unapologetic. “We have a very large portfolio of investments; some of them go up, some of them go down,” he said. Commented one onlooker: “That’s a bit rich coming from the lips that criticized Cordiant’s board for ‘successive poor management decisions’!”

Treger insisted that AVA’s £35m investment would have made commercial logic had the Cordiant board considered a capital injection before buckling under a £262m debt burden. But why the continued shopping spree after Cordiant’s acceptance of WPP’s offer?

“We bought more shares in the company because we hoped to create a situation with other investors to put a better proposal on the table,” justified Myerson. Both men confirmed they are still considering legal action over the way in which the Cordiant sale has been handled.

Truth told, the canny couple were outmanoeuvred by the even wilier Sir Martin Sorrell. The £10m bargain basement deal struck by the WPP fox, conceded the AVA pair, was “incredible”.

AVA manages £440m of funds on behalf of institutional investors such as CALPERS (the Californian state pension fund) and the State of Ohio pension fund – both of which have filed lawsuits against AOL Time Warner, charging that it promised profits that never materialized. UK onlookers are wondering in which direction their attorneys’ litigious gaze might now be turning?

Meantime, for lovers of exotica, the mystery of Madame Nahed Ojjeh’s eleventh-hour shopping spree for a 10.75% stake in Cordiant remains unresolved.

Data sourced from: MediaGuardian.co.uk; additional content by WARC staff