LONDON, May 29, 2003 (PRIMEZONE) -- Cordiant Communications Group PLC ("Cordiant") has entered into an agreement conditional on, amongst other things, shareholder approval, to dispose of a 70% interest in its principal Australian businesses ("The Communications Group" or "TCG"), including George Patterson Bates. It is proposed that TCG is acquired by The Communications Group Holdings ("TCGH"), a new corporate entity, which on completion will be owned 55% by funds advised by Pacific Equity Partners, 15% by TCG management and 30% by Cordiant. This transaction represents a first step in Cordiant's stated plan to reduce debt through a programme of non-core asset disposals.
The cash proceeds payable to Cordiant in respect of the disposal of TCG are A$61.2 million (24.6 million pounds) which, after deduction of transaction costs, will be used to repay debt. Prior to completion, Cordiant will also extract surplus cash of A$41.0 million (16.5 million pounds) which will be used to reduce net borrowings.
The retention by Cordiant of an equity interest in TCG through TCGH is consistent with the practice of other international agency groups, many of which have established or retained a presence in the Australian market through minority equity stakes. The Bates Group will continue to service its existing international clients in the Australian market through TCGH, which will, as part of the transaction, enter into network membership agreements with each of the Bates Group networks, in order to preserve continuity of service levels.
The Campaign Palace, one of Australia's leading creative agencies, which has always operated independently of George Patterson Bates, is not included in the transaction and will remain part of Cordiant.
In a separate transaction, it is intended that Cordiant will sell its interest in Western Australia based agency Marketforce to its management.
The Communications Group
The Communications Group is one of Australia's largest advertising and marketing communications groups, and provides a range of services to its clients including advertising, brand strategy, marketing strategy, media planning and buying, direct marketing, customer relationship management, public relations, sales promotion, interactive services, graphic design and retail store design. The Communications Group has approximately 900 employees, with its main offices located in Sydney, Melbourne, Brisbane and Auckland.
George Patterson Bates, the main component of TCG, was founded in 1934 and acquired by Bates Worldwide in 1964. In recent years TCG has expanded its service offering into branding and design, public relations, sales promotion, interactive and healthcare agencies.
In the year ended 31 December 2002, TCG's businesses on a combined basis generated revenues of A$128.4 million (51.6 million pounds) and profit before tax of A$5.1 million (2.1 million pounds). Net assets attributable to TCG as at 31 December 2002 were A$21.1 million (8.5 million pounds).
David Hearn, Chief Executive, commented: "This is a good deal for Cordiant and for the clients and employees of our Australian businesses. This transaction will allow the Bates Group to continue to service its international clients effectively whilst at the same time executing the first stage of our debt reduction programme."
Separately the Board continues to advance its other discussions as indicated in Cordiant's announcement of 12 May, and is seeking to bring them to a conclusion in the near future in the best interests of the Group and its clients. However, none of the proposals currently under consideration is likely to result in an offer at or near the current share price.
A circular will be sent to shareholders in due course seeking their approval for the disposal of TCG.
Note: The exchange rate used in this announcement is A$2.49 to GBP 1.00 pounds as at 28 May 2003.