WPP to finally take control of Rediffusion; Y&R to raise stake in Arun Nanda-led agency to 86%
Y&R, which owns 26.7 per cent in Rediffusion Y&R, is likely to raise its stake to 86 per cent in a deal staggered over the next few months.
WPP’s creative agency Young & Rubicam (Y&R), which owns 26.7 per cent in Rediffusion Y&R, is likely to raise its stake to 86 per cent in a deal staggered over the next few months. Y&R will first increase its stake to 51 per cent and gradually buy out Arun Nanda and Ajit Balakrishnan. Nanda and Balakrishnan currently own 60 per cent stake in Rediffusion Holdings Pvt Ltd.
It has Everest Brand Solutions, Wunderman, Sudler & Hennessey and Rediffusion-Edelman as subsidiaries.
The first stage of the deal – the acquisition of management control – will see Nanda and Balakrishnan take home a payout estimated to be around Rs 100 crore.
"Your sources may be incorrect," wrote Sorrell in response to an email questionnaire sent by ET. A mail written to Nanda did not elicit any response. But during his recent visit to India earlier this month, Sorrell told a number of WPP group CEOs about the agreement of the deal.
The due diligence has already begun. According to multiple sources, while Sorrell, Nanda and Balakrishnan have the deal in principle, they will sign on the dotted line in the coming months. Once the deal is sealed, Rediffusion Y&R and its group companies will be rebranded as Y&R to reflect the new ownership.
While Nanda is likely to exit the creative and media business completely, he will continue to oversee the PR business, and retain a controlling stake in PR agency Rediffusion-Edelman.
"Of all the Rediffusion companies, it is the PR division Edelman that clocks in more than 50 per cent of the revenues...I think it will be best for Nanda to go with the Y&R offer," said an advertising veteran aware of the deal.
Nanda and Balakrishnan first diluted their stake in 1994 when Dentsu Inc and Y&R, each bought 20 per cent stake in Rediffusion, which was then rebranded Rediffusion DY&R.
In 2000, WPP acquired Y&R. In 2004, the joint venture Dentsu-Y&R was formed in Japan, and the two agencies’ stakes in Rediffusion were redistributed as per a worldwide agreement. In India, Dentsu ended up with a 13.3 per cent stake, while Y&R held 26.7 per cent.
Dentsu’s 13.33 per cent stake is also likely to be transferred to Y&R, said a source familiar with the deal.