Some time today Chime Communications – the quoted British marcoms group that owns agency VCCP and a gaggle of sports marketing businesses under the CSM banner – should announce that it’s agreed to a takeover from big media and sports investor Providence Equity Capital and WPP.
The bid is worth about £350m, representing a 33 per cent premium to Chime’s share price. Last year Chime made £30m profit.
Providence, though, seems to be leading the deal with WPP content to keep a minority stake (it currently owns 20 per cent of Chime).
WPP has been a shareholder in Chime for years, an arrangement that began when Chime, then helmed by Lord Bell and Piers Pottinger, over-expanded with, among other things, the purchase of the HHCl agency. This was subsequently sold to WPP but failed to fly under either of its new owners.
Industry pundits may wonder why WPP is seemingly content to act with Providence. This isn’t WPP’s historic style although, of late, Sorrell has entered into a number of joint ventures on the media front. Sorrell has been busily expanding his own sports interests by backing George Pyne’s Bruin Sports Capital and grouping his other sports interests into something called ESP.
WPP is becoming a rather sprawling conglomerate with investments all over the place in a portfolio running from Vice Media to sport alongside its wholly-owned mainly agency assets. Maybe Sorrell feels he has to be in all these businesses but can’t afford to own all of them. Which is hardly the Sorrell of old.
It’s possible that Sorrell intends to extract VCCP from the company when the deal goes through, of course. We’ll see.
As expected Chime has accepted the joint Provident/WPP takeover, citing the need for more capital to develop a global sports business. Quite where this leaves VCCP, a highly successful UK ad agency, is an interesting question.
About half Chime’s £300m revenue comes from sports-related activities, so VCCP and various other bits clearly make a substantial contribution although it’s hard to see where they fit if the long term strategy is sport. With the world awash with private equity money, a VCCP management buyout must be an option, alongside a separate deal with WPP.