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How Chime will change if Bell buyout goes ahead

Summing up a satisfactory set of annual results, which had seen Chime pre-tax-profits climb 16 per cent, chairman Lord Bell (pictured) concluded: “The group is well positioned for the future with a very positive year ahead for sports marketing in particular.”

But not with me on board, he might have added sotto voce, and not my deputy Piers Pottinger either. Nor, come to think of it, quite a few others in Chime’s PR division.

Bizarrely, despite the naked glare of publicity and overt hostility from Chime’s biggest shareholder WPP, Bell is forging ahead with his buyout proposals, which I flagged earlier.

On that subject, more specific information has come to light. Bell and Pottinger are planning to take with them the whole of Bell Pottinger, including public affairs, Sans Frontières (transborder reputational issues) and Pelham BP (financial and corporate), of which Chime owns 60 per cent. What triggered the talks is the prospect of losing the remaining US government business at BP, which would cause a profit plunge in the Chime PR division as a whole.

Both sides at the negotiating table are rather hoping that Stakhanovite growth in sports marketing will paper over any divisions and, more to the point perhaps, make Chime’s necessary ‘repositioning’ after a Bell buyout more palatable to shareholders. At the moment, PR is the biggest element in the group’s operations – accounting for 44 per cent of its revenue. But it is already on a downward trend: operating income slid seven per cent to £69.2m in 2011. Sports marketing, on the other hand – accounting for 25 per cent of total revenues – soared 64 per cent to £83m. And with a number of acquisitions under the belt in such places as Brazil, that makes Chime look well set for the World Cup in 2014 and the 2016 Rio Olympics.

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When and if buyout negotiations are finalised, Chime senior non-executive director Rodger Hughes is expected to sound out Fidelity (seven per cent shareholder) and possibly JP Morgan (also seven per cent) about the proposals. How Chime will square WPP (nearly 18 per cent) remains to be seen.

Here’s what WPP chief executive Sir Martin Sorrell recently had to say on the matter:

“I think it sets a terrible precedent. It isn’t logical, and if you start to dismember the management of it [Chime], where does that begin and where does that end? As an investor in the company, one would rather it stayed together than split asunder.”

I await the outcome with interest.

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About Stuart Smith

Stuart Smith is one of the most incisive and knowledgeable commentators on global marketing. He was a long-time editor of Marketing Week during the period when it was the UK's leading marketing, media and advertising specialist publication. Visit Stuart Smith Blog.
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