WPP Group may yet face a challenge to its takeover of stricken rival Cordiant Communications.

On Friday, British fund manager and Cordiant shareholder Active Value revealed it had increased its stake to 23.94%. Of this, 7% has been acquired since the announcement of WPP’s deal to pay £256 million ($425m; €368m) for Cordiant’s debt plus a token £10m for its stock [WAMN: 19-Jun-03].

WPP requires 75% shareholder support for its acquisition to succeed, leaving Active Value little over 1% short of a blocking minority. The fund was a vocal critic of any takeover, proposing that Cordiant remain independent through a capital injection.

Its motives now, however, are unclear. If it simply blocks the current deal to get a higher price or keep Cordiant alive, WPP could put the ailing group into administration and acquire its assets that way, leaving shareholders with nothing. WPP is in a powerful position – it now owns all but £79m of the group’s debt, and its takeover is supported by Cordiant’s management and many of its clients.

Another possibility is that Active Value finds allies and tries to trump WPP’s bid. Reports over the weekend suggest that the fund is sounding out Grey Global Group as one such potential partner.

Data sourced from: multiple sources; additional content by WARC staff