Cordiant: The Plot (and Payoffs) Thicken

27 June 2003

Active Value Fund Management continued Thursday to build its stake in Cordiant Communications despite reaching earlier this week the critical 25% mark at which it can block the agreed bid from WPP Group. AVFM’s holding now stands at 25.73%.

Meantime, Sir Martin Sorrell raised WPP’s stake in the poker game by buying yet more of Cordiant’s outstanding debt, paying US investment fund Cerberus Capital Management £90 million ($149.40m; €130.63m) – or £11m over the par value it paid last week to holders of the rest of Cordiant's £256m debt. WPP claimed the extra cash had been allowed for within the £31m reorganisation costs already announced.

Against this background of big spending by the warring parties, the big debtor danced to WPP’s tune, writing to shareholders with details of AVFM’s various proposals and urging their rejection. Of the latter’s plan to recapitalise the floundering agency holding company, Cordiant opined it to be “incapable of implementation”.

The letter also revealed that AVFM’s intended placeman as Cordiant ceo is a “senior executive in one of the world's biggest advertising and communications groups, with experience in the restructuring and turnaround of international advertising networks.” But the masked man’s name had not been disclosed to Cordiant’s board and Active Value remains zip-lipped as to his identity.

And while SS Cordiant lists alarmingly in the turbulent waters, those already in the lifeboats – including the former captain and others whose navigation steered the ship onto the rocks – were handsomely rewarded for their efforts.

Cordiant’s delayed annual report finally reached shareholders Thursday to reveal that erstwhile chief executive Michael Bungey departed with a £750,000 pay-off. He continues to receive a salary of £100,000 plus a bonus of up to £50,000 for a continuing consultancy role. His pension details were not furnished.

Another bridge officer, William Whitehead, who quit in March 2002 did even better with £870,000. “It was a contractual obligation for a US-based director” explained Cordiant – whose market capitalisation is now just £11.5m.

Jean de Yturbe, an executive director who went non-executive in March, received £341,875 in compensation; while former chairman Charlie Scott, who resigned as a director in February, will continue to receive his £200,000 salary until the end of 2003.

In contrast to his cossetted colleagues, quondam finance director Art D’Angelo, who walked the plank last year, did so without a single penny in compensation.

Data sourced from: Multiple origins; additional content by WARC staff