AVFM Stokes Stake as Cordiant 'Put Option' Threatens WPP Deal

01 July 2003

Active Value Fund Management, the grit in the cosy oyster of a Cordiant Communications-WPP Group deal, has increased by two million shares its holding in the former. The stake now stands at 26.69%.

It also emerged Monday that Cordiant plans to delist its shares in a bid to prevent a crucial £75 million ($123.92m; €107.40m) 'put option' relating to ZenithOptimedia shedding up to 97% of its value.

A circular sent Monday to Cordiant shareholders revealed: “There are certain options over Cordiant’s 25% interest in ZenithOptimedia Group [the other 75% being held by Publicis Groupe], the exercise price of which may, in certain circumstances, whilst Cordiant remains subject to the Listing Rules, be subject to material reduction.

“By delisting Cordiant shares at this stage, Cordiant is seeking to ensure that the value of [its] interest in ZenithOptimedia Group would not be less than £75m. Accordingly, the Cordiant directors have concluded that it is in the best interests of Cordiant to cancel the listing of Cordiant shares as soon as practicable.”

Those close to the deal say that in certain circumstances, the value of the Zenith option could be reduced to a quarter of Cordiant’s market capitalisation. Word is that Cordiant directors have therefore agreed with WPP that delisting must happen before Cordiant is acquired.

AVFM’s wedge stake could block this stratagem if its co-drivers Julian Treger and Brian Myerson see fit. Under the Scheme of Arrangement with WPP, such a deal requires 75% approval. If Treger and Myerson give it the thumbs-down, WPP could apply to put Cordiant in administration and acquire its assets in return for its debt.

WPP yesterday made clear it will not buy-off AVFM with a sweetened offer. “Our offer is our offer. There will be no renegotiation,” Sir Martin Sorrell told shareholders at WPP’s annual meeting.

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