FORM 6 - K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the Month of June 2003
CORDIANT COMMUNICATIONS GROUP PLC
-------------------------------------------------
(Translation of registrant's name into English)
121-141 Westbourne Terrace
London W2 6JR
England
--------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
--- ---
If "Yes" is marked, indicate below the File Number assigned to the registrant in
connection with Rule 12g3-2(b):
--------------------.
FORWARD LOOKING AND CAUTIONARY STATEMENTS
-----------------------------------------
This report contains certain "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Generally, the
words "believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect" and similar expressions identify forward looking statements. The
Registrant has based these forward looking statements largely on its current
expectations and projections about future events and financial trends affecting
its business. These forward looking statements include statements relating to
trends in the advertising and marketing services industry, particularly with
respect to anticipated advertising expenditures in the world's advertising
markets. Actual advertising expenditures may differ materially from the
estimates contained therein depending on, among other things, regional, national
and international political and economic conditions, technological changes, the
availability of media and regulatory regimes in the world's advertising markets.
Additionally, this report contains a number of "forward looking statements"
relating to the Registrant's performance. The Registrant's actual results could
differ materially from those anticipated, depending on, among other things,
gains to or losses from its client base, the amount of revenue derived from
clients, the Registrant's exposure to changes in the exchange rates of major
currencies against the pound sterling (because a substantial portion of its
revenues are derived and costs incurred outside of the United Kingdom), the
general level of advertising expenditures in the Registrant's markets referred
to above and the overall level of economic activity in the Registrant's major
markets as discussed above. The Registrant's ability to reduce its fixed cost
base in the short term is limited and therefore its trading performance can be
significantly affected by variations in the level of its revenues.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CORDIANT COMMUNICATIONS GROUP PLC
(Registrant)
By: /s/ David Hearn
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Title: Director and Chief Executive
Officer
Date: June 19, 2003
Exhibit I
CORDIANT COMMUNICATIONS GROUP PLC
("Cordiant")
NOTIFIABLE HOLDINGS
Cordiant was notified on 16 June 2003 that Active Value Fund Managers Limited
has a holding of 69,888,099 Ordinary shares, representing 16.70% of the issued
share capital of the Company.
16 June 2003
Enquiries:
Cordiant Tel: +44 207 262 4343
Nathan Runnicles
College Hill Tel: +44 207 457 2020
Adrian Duffield
Exhibit II
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION
IN OR INTO AUSTRALIA OR JAPAN
WPP Group plc Cordiant Communications Group plc
19 June 2003
WPP GROUP PLC AND
CORDIANT COMMUNICATIONS GROUP PLC
RECOMMENDED PROPOSED ACQUISITION OF CORDIANT
The boards of WPP and Cordiant announce the terms of a recommended proposed
acquisition of Cordiant by means of a scheme of arrangement under section 425 of
the Companies Act 1985.
> WPP is to offer New WPP Shares in exchange for Cordiant's issued share
capital. The Proposal values the entire issued share capital of Cordiant at
approximately (pound)10.0 million and each Cordiant Share at approximately
2.4 pence, based on the closing mid-market price of 491 pence per WPP Share
on 18 June 2003.
> WPP has acquired the majority of Cordiant's Debt at par value from all but
one of Cordiant's Former Lenders. No payment has been or will be made to
these Former Lenders who have sold their debt to WPP in respect of their
entitlement to make-whole and certain other payments, currently estimated
to be approximately (pound)20 million. The par value of the total Cordiant
Debt, comprising both the Acquired Debt and the Remaining Debt, is
approximately (pound)256 million.
> The Proposal is unanimously recommended by the board of Cordiant, the
directors of which have irrevocably undertaken to vote in favour of the
resolutions required to give effect to the Scheme in respect of their own
beneficial holdings of 656,294 Cordiant Shares.
> The board of WPP expects the transaction to be earnings enhancing in the
first full financial year following completion of the Acquisition*.
> The Scheme Document is expected to be posted to Cordiant Shareholders
before the end of June 2003. The Cordiant shareholder meetings are expected
to be held in late July 2003 and the Scheme to become effective in early
August 2003.
> WPP intends, subject to market conditions, to raise approximately
(pound)100 million through a placing of new WPP shares.
> Cordiant will today issue a circular to Cordiant Shareholders notifying its
intention to cancel the listing of the Cordiant Shares with effect from
8.00 a.m. on 16 July 2003.
> Goldman Sachs International and HSBC are advising WPP in connection with
the Proposal.
> UBS Investment Bank is advising Cordiant in connection with the Proposal.
*This statement should not be interpreted as meaning that the earnings per share
of WPP, following the Acquisition, will necessarily exceed those for the year
ended 31 December 2002.
1
Commenting on the Proposal Sir Martin Sorrell, Group Chief Executive of WPP,
said:
"The acquisition of Cordiant will make an important contribution to our
long-term strategic goals . particularly in marketing services and expansion in
Asia. Given that our approach has been widely welcomed by Cordiant's clients, we
also believe that a merger with WPP promises both stability and opportunity to
Cordiant's clients and people."
David Hearn, Chief Executive Officer of Cordiant, said:
"The directors of Cordiant believe that Cordiant will have a sound future under
the ownership of WPP. In the light of current circumstances, Cordiant believes
that this Proposal provides the best outcome that is capable of being achieved
for shareholders."
This summary should be read in conjunction with the full text of the attached
announcement.
A conference call briefing for investment analysts will be held at 10.30 a.m. on
19 June 2003. Dial-in details are available from Buchanan Communications on 020
7466 5000.
Enquiries:
Cordiant 020 7262 4343 UBS Investment Bank 020 7567 8000
David Hearn Jonathan Rowley
Andy Boland John Woolland
College Hill 020 7457 2020
Alex Sandberg
Adrian Duffield
WPP 020 7408 2204
Sir Martin Sorrell
Paul Richardson
Chris Sweetland
Goldman Sachs International HSBC
020 7774 1000 Rupert Faure Walker 020 7992 2101
Richard Campbell-Breeden Nigel Medhurst 020 7992 2317
Stuart Cash
Buchanan Communications 020 7466 5000
Richard Oldworth
Mark Edwards
2
Goldman Sachs International is acting for WPP and no one else in connection with
the Proposal and will not be responsible to anyone other than WPP for providing
the protections afforded to clients of Goldman Sachs International or for
providing advice in relation to the Proposal.
HSBC is acting for WPP and no one else in connection with the Proposal and will
not be responsible to anyone other than WPP for providing the protections
afforded to clients of HSBC or for providing advice in relation to the Proposal.
UBS Investment Bank is acting for Cordiant and no one else in connection with
the Proposal and will not be responsible to anyone other than Cordiant for
providing the protections afforded to clients of UBS Investment Bank or for
providing advice in relation to the Proposal.
This press announcement does not constitute an offer or an invitation to
purchase any securities or a solicitation of an offer to buy any securities,
pursuant to the Proposal or otherwise. The New WPP Shares to be issued pursuant
to the Scheme have not been and will not be registered under the US Securities
Act of 1933, as amended (the Securities Act) nor under the securities laws of
any state of the United States but are intended to be issued to persons within
the United States pursuant to the exemption from the registration requirements
of the Securities Act provided by Section 3(a)(10) of the Securities Act. In
addition, no steps have been taken, nor will any be taken, to enable the New WPP
Shares to be offered in compliance with the applicable securities laws of Japan
and no prospectus in relation to the New WPP Shares has been, or will be, lodged
with or registered by the Australian Securities and Investment Commission.
Accordingly, the New WPP Shares may not be offered, sold, transferred, resold,
delivered or distributed, directly or indirectly, in or into Japan or Australia
(except in transactions exempt from or not subject to the registration
requirements of the relevant securities laws of Japan or Australia).
This press announcement contains certain forward-looking statements within the
meaning of Section 21E of the US Securities Exchange Act of 1934 and the US
Private Securities Litigation Reform Act of 1995. Generally, believe, may, will,
estimate, continue, anticipate, intend, expect and similar expressions identify
forward-looking statements relating to expectations, beliefs, projections,
future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts, including, without
limitation, WPP's expectations about earnings from the proposed transaction.
These forward-looking statements reflect WPP's current views about future events
and are subject to risks, uncertainties, assumptions and changes in
circumstances that may cause WPP's actual results to differ significantly from
those expressed in any forward-looking statement. Certain factors that could
cause actual results to differ materially from expected results include delays
in completing the Proposal, difficulties in integrating Cordiant into WPP's
operations, and changes in global economic, business, competitive market and
regulatory factors. For more information regarding risk factors relevant to WPP,
please see WPP's filings with the US Securities and Exchange Commission,
including its most recent annual report on Form 20-F.
Cordiant has based its forward-looking statements largely on its current
expectations and projections about future events and financial trends affecting
its business. These forward-looking statements include statements about the
completion of the proposed transaction, which is subject to conditions and
uncertainties, including those described in this press announcement, and many of
which are beyond Cordiant's ability to control or predict. These forward-looking
statements also include statements relating to trends in the advertising and
marketing services industry, particularly with respect to anticipated
advertising expenditures in the world's advertising markets. Actual advertising
expenditures may differ materially from the estimates contained therein
depending on, among other things, regional, national and international political
and economic conditions, technological changes, the availability of media and
regulatory regimes in the world.s advertising markets. Additionally, this press
announcement contains forward-looking statements relating to Cordiant's
performance. Cordiants actual results could differ materially from those
anticipated, depending on, among other things, gains to or losses from its
client base, the amount of revenue derived from clients, Cordiant's exposure to
changes in the exchange rates of major currencies against the pound sterling
(because a substantial portion of its revenues are derived and costs incurred
outside of the United Kingdom), the general level of advertising expenditures in
Cordiant's markets referred to above and the overall level of economic activity
in Cordiant's major markets as discussed above. Cordiant's
3
ability to reduce its fixed cost base in the short term is limited and therefore
its trading performance can be significantly affected by variations in the level
of its revenues.
WPP and Cordiant do not intend, and disclaim any duty or obligation, to update
or revise any industry information or forward-looking statements set forth in
this press announcement to reflect new information, future events or otherwise.
As regards persons not resident in the United Kingdom, the Proposal may be
affected by the laws of the relevant jurisdictions in which they are located.
Persons who are not resident in the United Kingdom should inform themselves
about, and observe, any applicable requirements.
Stabilisation/FSA
Appendix II contains the definitions of certain terms used in this press
announcement.
4
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION
IN OR INTO AUSTRALIA OR JAPAN
WPP Group plc Cordiant Communications Group plc
19 June 2003
WPP GROUP PLC AND
CORDIANT COMMUNICATIONS GROUP PLC
RECOMMENDED PROPOSED ACQUISITION OF CORDIANT
1. Introduction
The boards of WPP and Cordiant announce the terms of a recommended proposed
acquisition of Cordiant by means of a scheme of arrangement under section 425 of
the Companies Act 1985.
2. Outline of the Proposal
Under the Proposal, which will be subject to the conditions and further terms
set out in Appendix I and in the Scheme Document, WPP will acquire the entire
issued ordinary share capital of Cordiant. Cordiant Shareholders will, in
consideration, receive New WPP Shares on the following basis:
One New WPP Share for every 205 Cordiant Shares
Based on the closing mid market price of 491 pence per WPP Share on 18 June
2003, the Proposal values the entire issued share capital of Cordiant at
approximately (pound)10.0 million and each Cordiant Share at approximately 2.4
pence.
WPP has entered into a Debt Transfer Agreement with all but one of Cordiant's
Former Lenders, under which WPP has purchased the Acquired Debt for (pound)177
million, being an amount equal to the par value of the obligations outstanding
at the date of the agreement. The remaining Lender has retained its debt holding
in Cordiant with a par value of approximately (pound)79 million. The aggregate
par value of the Acquired Debt and the Remaining Debt is approximately
(pound)256 million.
The implementation of the Scheme will require the approval of Cordiant
Shareholders at the Court Meeting and at the Cordiant EGM, as well as the
sanction of the Scheme by the Court.
Upon the Scheme becoming effective, it will be binding on all Cordiant
Shareholders, irrespective of whether or not they attend or vote at any meetings
of Cordiant Shareholders held for the purpose of approving the Scheme.
The Scheme Document is expected to be posted to Cordiant Shareholders before the
end of June 2003. The Cordiant shareholder meetings are expected to be held in
late July 2003 and, subject to the approval of Cordiant Shareholders and the
sanction of the Court, the Scheme is expected to become effective in early
August 2003.
The conditions to which the Scheme will be subject are set out in Appendix I.
5
3. Background to the Proposal and reasons for Cordiant Shareholders to accept
The board of Cordiant has been carefully considering a range of strategic
alternatives since the end of April and, in the light of Cordiant's current
circumstances, believes that the Proposal provides the best outcome that is
capable of being achieved for Cordiant Shareholders. In the opinion of
Cordiant's d+-irectors, the acquisition of Cordiant by WPP also provides the
best future for Cordiant's clients and staff.
No payment has been or will be made to the Former Lenders who have sold their
debt to WPP in respect of their entitlement to make-whole and certain other
payments which in aggregate total approximately (pound)20 million. Nevertheless,
the Proposal offers Cordiant Shareholders an opportunity to receive some value.
Background
Against a rapidly deteriorating industry background, Cordiant had to renegotiate
its financing arrangements in April 2002. During the course of 2002, in addition
to the negative impact on revenues from the reduction in global advertising
spending, Cordiant lost two of its largest US clients, Hyundai and Wendy's.
Significant management action was taken to restructure the Cordiant Group, and
to reduce costs substantially, in order to create a structure better suited to
the difficult market conditions. However, despite achieving some important new
business wins in the final quarter of 2002, the Group has suffered further loss
of clients in 2003.
In February 2003, Cordiant was obliged to re-open discussions with its Lenders
to renegotiate its financial covenants. At that point the Cordiant board
announced a programme of non-core disposals to reduce debt. Cordiant expected to
agree new financing terms with the Lenders during the spring and intended
thereafter to raise new equity to establish a firm financial footing for the
business.
By the end of April 2003 Cordiant was well advanced in agreeing new financing
terms with its Lenders. At this time Cordiant was notified that Allied Domecq,
the second largest of its global clients, was terminating its contract with
Cordiant with effect from October 2003. This will have a substantial impact on
operating profit from 2004 onwards. Cordiant immediately re-entered into
discussions with its Lenders to secure new short term financing and to determine
a new plan to address its longer term financing needs.
The quality of Cordiant's work continues to be regarded highly. However, the
overriding concerns of many clients have been Cordiant's financial condition and
whether it can retain the critical mass required to service their businesses in
the future. As a result of these concerns, several of Cordiant's major clients
have made known their clear preference that Cordiant should align with a strong
industry partner.
Strategic review
Since the end of April 2003, the Cordiant board has been reviewing a range of
strategic alternatives, including the issue of new equity, a debt for equity
swap, further asset disposals and the sale of the entire business. This review
has concluded that, in light of the increasing difficulty in winning new
business and retaining revenue from existing clients and of the views of
Cordiant's Lenders and leading clients, the best interests of Cordiant are
likely to be served
6
through a combination with a major industry player. In the absence of such a
transaction, the directors of Cordiant believe that it would become even more
difficult to retain Cordiant's clients and staff. The uncertain revenue outlook,
and the requirement for the continued support of its Lenders, led the board of
Cordiant to the view that there was insufficient certainty of achieving an
acceptable return to shareholders to justify seeking to raise the large amount
of new equity capital that would have been required to rectify Cordiant's
financial position.
As a result, discussions have taken place with all of the major agency groups
and others. It has become clear that no prospective purchaser would be willing
to assume the full level of secured debt, including entitlements to make-whole
and other payments, within the Cordiant Group, leaving the prospect that
Cordiant Shareholders would have received no payment at all. Nevertheless the
board of Cordiant has achieved an outcome that provides some value to
shareholders.
Conclusions and recommendation of the Cordiant board
Cordiant has many excellent businesses and employees, producing highly regarded
work for its clients. There is a strong fit between Cordiant's and WPP.s client
bases and the board of Cordiant believes that Cordiant will have a sound future
under the ownership of WPP.
In the light of Cordiant's current circumstances and of the factors mentioned in
this announcement, the board of Cordiant, which has been so advised by UBS
Investment Bank, considers the terms of the Proposal to be fair and reasonable.
In providing advice to the directors of Cordiant, UBS Investment Bank has taken
into account the Cordiant directors'commercial assessments.
The directors of Cordiant believe that the implementation of the Scheme is in
the best interests of Cordiant Shareholders as a whole and unanimously recommend
Cordiant Shareholders to vote in favour of the resolutions to implement the
Scheme to be proposed at the Court Meeting and the Cordiant EGM, as they have
irrevocably undertaken to do in respect of their aggregate beneficial holdings
amounting to 656,294 Cordiant Shares.
The Cordiant Group is currently able to pay its debts as they fall due. Should
Cordiant Shareholders not approve the Scheme or the Scheme not become effective
for other reasons, Cordiant would remain dependent on the continued support of
its Lenders. If such support is withdrawn, and if additional sources of
financing are not made available to Cordiant, it is likely that an administrator
or administrative receiver would be appointed in respect of Cordiant. In these
circumstances, Cordiant Shareholders would be highly unlikely to receive any
value for their shares.
4. WPP rationale for the Proposal
The board of WPP is committed to delivering added value to clients, shareholders
and employees by continuing to be a significant player in the global advertising
and marketing services industry. This will be achieved by providing local and
multi-national clients with comprehensive solutions to reach their customers,
build their brands, enhance their market position and develop superior service
capabilities in a cost-effective manner.
7
The board of WPP continues to believe that strengthening the service offering of
each of its agency networks and enhancing its geographic reach is critical to
providing clients with advertising and marketing services solutions.
The integration of Cordiant into WPP is expected to:
> strengthen relationships with key multi-national and local clients;
> add Cordiant's acknowledged strength in Asia to help meet WPP's strategic
goal of having one third of its business in Asia Pacific and Latin America;
> strengthen WPP's offering in quantitative aids to decision making with the
addition of the 141 Worldwide businesses to WPP's existing position in CRM,
direct and interactive marketing;
> enhance WPP's position in the fast growing area of healthcare marketing and
advertising through the acquisition of the Healthworld network; and
> through the acquisition of Fitch give WPP an additional strong network in
the area of branding & identity, adding to WPP's existing brands,
Enterprise IG and Landor.
5. Financial effects on WPP
The board of WPP expects to derive synergies from a combination of head office
rationalisation and improved operational performance by improving the margins of
the operating units in the various geographic territories in which WPP operates.
The board of WPP expects the transaction to be earnings enhancing in the first
full financial year following completion of the Acquisition.*
Based on the cost of the Acquired Debt of approximately (pound)177 million, the
par value of the Remaining Debt of approximately (pound)79 million, and the
issue of New WPP Shares with an aggregate value (based on the closing mid-market
price of 491 pence per WPP share on 18 June 2003) of (pound)10.0 million for the
issued share capital of Cordiant, the total estimated cost of the acquisition
will be approximately (pound)266 million.
WPP intends, subject to market conditions, to refinance part of the
consideration for the Acquired Debt through a placing by way of an accelerated
global tender of new WPP Shares, which is expected to raise proceeds (before
deduction of commissions and expenses) of approximately (pound)100 million. The
Placing is not conditional on the completion of the Proposal.
Cordiant announced in February 2003 that it intended to dispose of a majority
stake in Cordiant's Australian businesses (including George Patterson Bates),
Cordiant's 77 per cent interest in Scholz & Friends and its FD International
businesses. WPP expects that the aggregate net proceeds arising from these
planned disposals, including cash extraction, will amount to approximately
(pound)85 million in total. Conditional agreements have been signed with respect
to the sales of Cordiant's principal Australian businesses and Scholz & Friends.
*This statement should not be interpreted as meaning that the earnings per share
of WPP, following the Proposal, will necessarily exceed those for the year ended
31 December 2002.
8
Of the provisions included in Cordiant's balance sheet as at 31 December 2002,
WPP estimates that (pound)29 million of outstanding liabilities on surplus
leasehold properties and reorganisation costs remain. WPP has also estimated
that earn outs and deferred consideration payable resulting from previous
Cordiant transactions amount to approximately (pound)9 million.
WPP has identified additional costs associated with the transaction including
restructuring costs relating to known account losses of approximately (pound)7
million, outstanding transaction expenses of (pound)16 million and further
reorganisation costs estimated at up to (pound)31 million.
6. Information on WPP
WPP is one of the world's leading communications services groups, providing
national, multi-national and global clients with advertising; media investment
management; information, insight and consultancy; public relations and public
affairs; branding and identity; and healthcare and specialist communications.
WPP's worldwide companies include J. Walter Thompson, Ogilvy & Mather Worldwide,
Young & Rubicam, Red Cell, MindShare, Mediaedge:cia, Millward Brown, Research
International, Kantar Media Research, OgilvyOne, Wunderman, Hill & Knowlton,
Ogilvy Public Relations, Burson-Marsteller, Cohn & Wolfe, CommonHealth, Sudler &
Hennessey, Enterprise IG and Landor, among others.
WPP companies provide communications services to clients globally including more
than 330 of the Fortune Global 500, over one-half of the NASDAQ 100 and 42 of
the Fortune e-50. WPP companies work with over 330 clients in three or more
disciplines, more than 230 clients in four disciplines and over 200 clients in
six or more countries.
Collectively WPP employs more than 62,000 people in 1,400 offices in 103
countries.
For the year ended 31 December 2002, WPP reported gross billings of (pound)18.0
billion, revenue of (pound)3.9 billion and profit before tax and goodwill
amortisation and impairment of (pound)383.1 million. As at 18 June 2003, WPP had
a market capitalisation of approximately (pound)5.7 billion.
7. Information on Cordiant
Cordiant is a global marketing communications company. Cordiant's operations are
divided into the Bates Group and other businesses. In addition, Cordiant has a
25 per cent. interest in Zenith Optimedia Group Limited, a leading global media
buying and planning group.
The Bates Group comprises the operations of Bates Worldwide, 141 Worldwide,
Healthworld and Fitch:Worldwide. Other businesses comprise the operations of two
networks that are planned for disposal: FD International and Scholz & Friends.
For the year ended 31 December 2002, Cordiant reported revenues of (pound)532.7
million (2001: (pound)605.0 million), operating profit+ of (pound)37.0 million
(2001: (pound)36.5 million) and net assets of (pound)80.9 million (2001:
(pound)317.1 million).
The financial statements for the year ended 31 December 2002 were presented on a
going concern basis. However, the Cordiant directors noted that until the
outcome of Cordiant's evaluation of its strategic options, and the implications
of this for Cordiant's future funding structure were known, there was
considerable uncertainty about this basis of preparation. Cordiant's auditors'
scope of work was limited in determining the appropriateness of the going
9
concern basis of preparation of the financial statements, due to this
uncertainty. Accordingly the auditors were unable to form an opinion as to
whether the financial statements gave a true and fair view in this regard.
For the year ending 31 December 2002, the revenue contributions recorded by
Cordiant's main business units were as follows:
--------------------------------------------------------------------------------
% of 2002 Revenue
---------------------------
Business Actual Proforma1
--------------------------------------------------------------------------------
Bates/141 61% 80%
--------------------------------------------------------------------------------
Fitch 9% 12%
--------------------------------------------------------------------------------
Healthworld 6% 8%
--------------------------------------------------------------------------------
Businesses being sold2 24% -
--------------------------------------------------------------------------------
100% 100%
--------------------------------------------------------------------------------
Source: Cordiant Management Reports.
1. Adjusted for planned disposals.
2. Includes Cordiant's principal Australian businesses, Scholz & Friends and FD
International.
+ stated pre-goodwill amortisation and impairment, and pre-exceptional operating
expenses.
8. Management and employees
The existing rights, including pension rights, of all employees of the Cordiant
Group will be honoured if the Acquisition is completed. WPP believes that the
management and employees of Cordiant will benefit from the enhanced
opportunities available to them within the WPP Group.
9. Details of the Scheme
Under the Proposal, which will be subject to the conditions and further terms
set out in Appendix I and in the Scheme Document, WPP will acquire the entire
issued share capital of Cordiant. Cordiant Shareholders will, in consideration,
receive New WPP Shares on the following basis:
One New WPP Share for every 205 Cordiant Shares
Based on the closing mid market price of 491 pence per WPP Share on 18 June
2003, the Proposal values the entire issued share capital of Cordiant at
approximately (pound)10.0 million and each Cordiant Share at approximately 2.4
pence.
Where fractional entitlements to New WPP Shares arise from the implementation of
the Scheme, these will be aggregated and sold and the proceeds paid to the
Cordiant Shareholders entitled thereto.
The New WPP Shares issued pursuant to the Scheme will be issued credited as
fully paid and will rank pari passu in all respects with the existing WPP
Shares, including the right to receive and retain in full future dividends and
other distributions (if any) declared, made or paid after the date of this
announcement, save for the final dividend in respect of the year ended 31
10
December 2002 of 3.67 pence per WPP Share payable on 7 July 2003 to WPP
Shareholders appearing on the WPP register of members as at 6 June 2003.
The implementation of the Scheme will be subject to the conditions set out in
Appendix I, including:
> the approval of the Scheme by Cordiant Shareholders at a meeting to be
convened by direction of the Court;
> the approval of a resolution to amend Cordiant's Articles of Association in
connection with the implementation of the Scheme being passed at an
extraordinary general meeting of Cordiant;
> the sanction of the Scheme by the Court; and
> the delisting of Cordiant's Shares (as explained below).
The approval required at the Court Meeting is a majority in number representing
at least 75 per cent. by value of those Cordiant Shareholders voting at the
meeting.
The Scheme Document relating to the Proposal will be sent to Cordiant
Shareholders as soon as practicable. The Scheme Document will explain the terms
of the Scheme and contain notices of the Cordiant shareholder meetings required
to approve the Scheme.
Once the necessary approvals from Cordiant Shareholders have been obtained at
the Court Meeting and at the Cordiant EGM to be held in connection with the
Scheme and the other conditions have been satisfied, or waived, the Scheme will
become effective upon the delivery to the Registrar of Companies of a copy of
the order of the Court sanctioning the Scheme. This is expected to occur in
early August 2003.
If the Scheme does not become effective on or before 31 August 2003, or such
later date as WPP and Cordiant may agree and the Court may permit, it shall not
thereafter be capable of becoming effective.
10. Cancellation of listing of Cordiant Shares
A condition of the Scheme proposed by WPP is that Cordiant Shares cease to be
listed by the UK Listing Authority, and Cordiant therefore ceases to be subject
to the Listing Rules, prior to the meeting of Cordiant Shareholders to consider
the Scheme. Cordiant will today issue a circular to Cordiant Shareholders
notifying Cordiant's intention to cancel the listing of Cordiant Shares and the
trading of such shares on the London Stock Exchange. Delisting is expected to
take effect at 8.00 a.m. on 16 July 2003 and the last day for dealings in
Cordiant Shares is expected to be 15 July 2003. Cordiant also intends to
terminate the listing of Cordiant's American Depositary Shares on the New York
Stock Exchange in due course.
There are options over Cordiant's 25 per cent. interest in Zenith Optimedia
Group Limited, the exercise price of which may, in certain circumstances, whilst
Cordiant remains subject to the Listing Rules, be subject to material reduction.
By delisting Cordiant Shares at this stage, Cordiant is seeking to ensure that
the value of the Cordiant Group.s interest in Zenith Optimedia Group Limited
would be not less than (pound)75 million. Accordingly, the directors of
11
Cordiant believe that it is in the best interests of Cordiant to cancel the
listing of Cordiant Shares as soon as practicable.
11. Settlement, listing and dealing
9Application will be made to the London Stock Exchange for the new WPP Shares to
be admitted to trading on its market for listed securities and to the UK Listing
Authority for the New WPP Shares to be admitted to the Official List. It is
expected that listing will become effective and that dealings will commence on,
or shortly after, the day on which the Scheme becomes effective.
Certificates for New WPP Shares to be issued to Cordiant Shareholders will be
sent no later than fourteen days after the Scheme becomes effective. No
certificates for New WPP Shares will be issued in respect of the entitlements of
those Cordiant Shareholders who hold their shares in CREST, settlement for which
will be made through the applicable CREST procedure.
Further details on listing, dealing and settlement will be included in the
Scheme Document to be sent to Cordiant Shareholders.
12
Goldman Sachs International is acting for WPP and no one else in connection with
the Proposal and will not be responsible to anyone other than WPP for providing
the protections afforded to clients of Goldman Sachs International or for
providing advice in relation to the Proposal.
HSBC is acting for WPP and no one else in connection with the Proposal and will
not be responsible to anyone other than WPP for providing the protections
afforded to clients of HSBC or for providing advice in relation to the Proposal.
UBS Investment Bank is acting for Cordiant and no one else in connection with
the Proposal and will not be responsible to anyone other than Cordiant for
providing the protections afforded to clients of UBS Investment Bank or for
providing advice in relation to the Proposal.
This press announcement does not constitute an offer or an invitation to
purchase any securities or a solicitation of an offer to buy any securities,
pursuant to the Proposal or otherwise. The New WPP Shares to be issued pursuant
to the Scheme have not been and will not be registered under the US Securities
Act of 1933, as amended (the Securities Act.) nor under the securities laws of
any state of the United States but are intended to be issued to persons within
the United States pursuant to the exemption from the registration requirements
of the Securities Act provided by section 3(a)(10) of the Securities Act. In
addition, no steps have been taken, nor will any be taken, to enable the New WPP
Shares to be offered in compliance with the applicable securities laws of Japan
and no prospectus in relation to the New WPP Shares has been, or will be, lodged
with or registered by the Australian Securities and Investment Commission.
Accordingly, the New WPP Shares may not be offered, sold, transferred, resold,
delivered or distributed, directly or indirectly, in or into Japan or Australia
(except in transactions exempt from or not subject to the registration
requirements of the relevant securities laws of Japan or Australia).
This press announcement contains certain forward-looking statements within the
meaning of Section 21E of the US Securities Exchange Act of 1934 and the US
Private Securities Litigation Reform Act of 1995. Generally, "believe", "may",
"will", "estimate", "continue", "anticipate", "intend", "expect" and similar
expressions identify forward-looking statements relating to expectations,
beliefs, projections, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical facts,
including, without limitation, WPP's expectations about earnings from the
proposed transaction. These forward-looking statements reflect WPP's current
views about future events and are subject to risks, uncertainties, assumptions
and changes in circumstances that may cause WPP's actual results to differ
significantly from those expressed in any forward-looking statement. Certain
factors that could cause actual results to differ materially from expected
results include delays in completing the Proposal, difficulties in integrating
Cordiant into WPP's operations, and changes in global economic, business,
competitive market and regulatory factors. For more information regarding risk
factors relevant to WPP, please see WPP's filings with the US Securities and
Exchange Commission, including its most recent annual report on Form 20-F.
Cordiant has based its forward-looking statements largely on its current
expectations and projections about future events and financial trends affecting
its business. These forward-looking statements include statements about the
completion of the proposed transaction, which is subject to conditions and
uncertainties, including those described in this press announcement, and many of
which are beyond Cordiant's ability to control or predict. These forward-looking
statements also include statements relating to trends in the advertising and
marketing services industry, particularly with respect to anticipated
advertising expenditures in the world's advertising markets. Actual advertising
expenditures may differ materially from the estimates contained therein
depending on, among other things, regional, national and international political
and economic conditions, technological changes, the availability of media and
regulatory regimes in the world.s advertising markets. Additionally, this press
announcement contains forward-looking statements relating to Cordiant's
performance. Cordiant's actual results could differ materially from those
anticipated, depending on, among other things, gains to or losses from its
client base, the amount of revenue derived from clients, Cordiant's exposure to
changes in the exchange rates of major currencies against the pound sterling
(because a substantial portion of its revenues are derived and costs incurred
outside of the United Kingdom), the general level of advertising expenditures in
Cordiant's markets referred to
13
above and the overall level of economic activity in Cordiant's major markets as
discussed above. Cordiant's ability to reduce its fixed cost base in the short
term is limited and therefore its trading performance can be significantly
affected by variations in the level of its revenues.
WPP and Cordiant do not intend, and disclaim any duty or obligation, to update
or revise any industry information or forward-looking statements set forth in
this press announcement to reflect new information, future events or otherwise.
As regards persons not resident in the United Kingdom, the Proposal may be
affected by the laws of the relevant jurisdictions in which they are located.
Persons who are not resident in the United Kingdom should inform themselves
about, and observe, any applicable requirements.
Stabilisation/FSA
Appendix II contains the definitions of certain terms used in this press
announcement.
14
APPENDIX I
Conditions of the implementation of the Scheme and the Acquisition
1. The Acquisition is conditional upon the Scheme becoming unconditional and
effective by not later than 31 August 2003 or such later date as Cordiant
and WPP may agree and the Court may approve. The Scheme will be conditional
on:
(a) approval of the Scheme by a majority in number of the holders of the
Cordiant Shares who vote, representing not less than 75 per cent. in
value of the Cordiant Shares voted, either in person or by proxy, at
the Court Meeting;
(b) approval of the resolution required in connection with the
implementation of the Scheme being passed at the Cordiant EGM;
(c) the sanction (with or without modification) of the Scheme by the Court
and an office copy of the Order of the Court being delivered by
Cordiant for registration to the Registrar of Companies in England and
Wales; and
(d) (i) the UK Listing Authority agreeing to admit the New WPP Shares to
the Official List; and
(ii) the London Stock Exchange agreeing to admit the New WPP Shares to
trading on the London Stock Exchange.
2. The Acquisition will also be conditional upon (and the necessary action to
make the Scheme effective will not be taken unless the following conditions
are satisfied or, where applicable, waived):
(a) no government or governmental, quasi-governmental, supranational,
statutory, regulatory or investigative body (excluding the European
Commission and any other anti-trust or merger control authority),
court, trade agency, or environmental body in any jurisdiction (each a
"Relevant Authority") having done anything which, in each case, would
or might reasonably be expected to:
(i) make the Acquisition or the Scheme or their respective
implementation, or the acquisition or proposed acquisition by WPP
or any subsidiary of WPP of any shares in, or control of,
Cordiant or any member of the Cordiant Group which is material in
the context of the Cordiant Group taken as a whole, void, illegal
or unenforceable under any jurisdiction, or otherwise, directly
or indirectly, restrain, prohibit, restrict or delay the same,
impede or impose additional conditions or obligations with
respect thereto, or otherwise materially challenge or hinder the
Acquisition, the Scheme or any such acquisition;
15
(ii) require, prevent or delay the divestiture (or alter the terms
envisaged for any proposed divestiture) by WPP or any member of
the WPP Group of any shares or other securities (or the
equivalent) in Cordiant or any member of the Cordiant Group;
(iii) require, prevent or delay the divestiture (or alter the terms
envisaged for any proposed divestiture) by any member of the WPP
Group or by any member of the Cordiant Group of all or any
material portion of their respective businesses, assets or
property or impose any material limitation on the ability of any
of them to conduct their respective businesses (or any of them)
or own their respective assets or properties or any part thereof;
(iv) impose any material limitation on, or result in a material delay
in, the ability of WPP to acquire, or to hold or to exercise
effectively, directly or indirectly, all or any rights of
ownership of shares or other securities (or the equivalent) in,
or to exercise voting or management control over, Cordiant or any
member of the Cordiant Group or on the ability of any member of
the Cordiant Group to hold or exercise effectively, directly or
indirectly, all or any rights of ownership of shares or other
securities (or the equivalent) in, or to exercise voting or
management control over, any member of the Cordiant Group;
(v) require any member of the WPP Group or the Cordiant Group to
acquire, or to offer to acquire, any shares or other securities
(or the equivalent) or any asset owned by any third party;
(vi) require any member of the Cordiant Group and/or the WPP Group to
sell, or offer to sell, any shares or other securities (or the
equivalent) in, or any asset owned by, any member of the Cordiant
Group and/or the WPP Group;
(vii) impose any material limitation on the ability of any member of
the WPP Group or the Cordiant Group to integrate or co-ordinate
its business, or any part of it, with the businesses or any part
of the businesses of any other member of the WPP Group and/or the
Cordiant Group;
(viii) result in any member of the WPP Group or the Cordiant Group
ceasing to be able to carry on business under any name under
which it presently does so; or
(ix) otherwise materially and adversely affect the business, profits,
financial or trading position of any member of the WPP Group or
any member of the Cordiant Group,
in any such case to an extent which is material in the context of the
WPP Group or the Cordiant Group, respectively, taken as a whole;
16
(b) save as Disclosed (as defined in paragraph (c) below) there being no
provision of any agreement, arrangement, licence, franchise, facility,
lease or other instrument to which any member of the Cordiant Group is
a party or by or to which any such member or any of its assets may be
bound, entitled or be subject and which, in consequence of the
Acquisition or the Scheme, or the direct or indirect acquisition or
proposed acquisition by WPP or any member of the WPP Group of any
ordinary shares in, or control of, Cordiant or because of a change in
the control or management of Cordiant would or might reasonably be
expected to result in, in any such case in a manner or to an extent
which is material in the context of the WPP Group or the Cordiant
Group, respectively, taken as a whole:
(i) any monies borrowed by, or any indebtedness or liability (actual
or contingent) of, or any grant available to any member of the
Cordiant Group becoming, or being declared, repayable immediately
or prior to their or its stated maturity or the ability of any
such member to borrow monies or incur any indebtedness being
withdrawn;
(ii) the creation or enforcement of any mortgage, charge or other
security interest whether arising or having arisen over the whole
or any part of the business, property or assets of any member of
the Cordiant Group or any such mortgage, charge or other security
interest becoming enforceable;
(iii) any such agreement, arrangement, licence, franchise, facility,
lease or other instrument or the rights, liabilities, obligations
or interests thereunder being terminated or adversely modified or
affected or any action being taken or any obligation or liability
arising thereunder;
(iv) any assets or interests of, or any asset the use of which is
enjoyed by, any member of the Cordiant Group being or falling to
be disposed of or charged, or ceasing to be available to any
member of the Cordiant Group, or any right arising under which
any such asset or interest could be required to be disposed of or
charged or could cease to be available to any member of the
Cordiant Group;
(v) any member of the Cordiant Group ceasing to be able to carry on
business under any name under which it presently does so;
(vi) the value of, or financial or trading position of any member of
the Cordiant Group being adversely affected; or
(vii) the creation of material liabilities (actual or contingent) by
any member of the Cordiant Group,
17
and no event having occurred which, under any provision of any
agreement, arrangement, licence, franchise, facility, lease or other
instrument to which any member of the Cordiant Group is party or by or
to which any such member or any of its assets is bound, entitled or
subject, could result in any of the events or circumstances as are
referred to in sub-paragraphs (i) to (vii) of this paragraph (b) in
any such case where such result would be material in the context of
the WPP Group or the Cordiant Group, respectively, taken as a whole;
(c) no member of the Cordiant Group having, since 31 December 2002, being
the date to which the most recent audited accounts of Cordiant, as
provided to WPP, were made up, save as disclosed in such accounts or,
prior to 19 June 2003, otherwise publicly announced by Cordiant
through a Regulatory Information Service or fairly disclosed by
Cordiant to WPP in written materials or otherwise actually known to
any of the executive directors of WPP as at such date (and for the
purposes of these conditions .Disclosed. means disclosed in any such
fashion):
(i) issued or agreed to issue, or authorised the issue of, additional
shares of any class, or securities convertible into or
exchangeable for, or rights, warrants or options to subscribe for
or acquire, any such shares or convertible securities (save for
issues to Cordiant or wholly-owned subsidiaries of Cordiant or an
issue by any member of the Cordiant Group other than Cordiant pro
rata to existing shareholdings in such member);
(ii) recommended, declared, paid or made any bonus issue, dividend or
other distribution (other than dividends lawfully paid or payable
to another member of the Cordiant Group and dividends in favour
of minority shareholders in subsidiaries paid pro rata to all
existing members thereof in accordance with the Group.s normal
dividend practices and policies for subsidiaries);
(iii) save for transactions between two or more members of the
Cordiant Group ("intra-Cordiant Group transactions"), made or
authorised or announced its intention to propose any material
change in its loan capital;
(iv) save for intra-Cordiant Group transactions, implemented,
authorised, or announced its intention to propose any merger,
demerger, reconstruction, amalgamation, scheme or other
transaction or arrangement or (other than in the ordinary course
of business) acquired or disposed of, or transferred, mortgaged
or charged, or created any security interest over, any asset or
any right, title or interest in any asset, other than in favour
of the Lenders;
(v) issued or authorised, or announced an intention to authorise or
propose, the issue of any debentures or (save in the ordinary
course of business and save for intra-Cordiant Group
transactions) incurred any indebtedness or contingent liability
which is material in the context of the Cordiant Group taken as a
whole;
18
(vi) save for intra-Cordiant Group transactions, purchased, redeemed
or repaid, or announced any proposal to purchase, redeem or
repay, any of its own shares or other securities (or the
equivalent) or reduced or made any other change to or proposed
the reduction of, or other change to, any part of its share
capital;
(vii) entered into or varied in any material respect or authorised or
announced its intention to enter into or vary in any material
respect any contract, transaction, arrangement or commitment
(whether in respect of capital expenditure or otherwise) which is
outside the ordinary course of business or of a long term,
onerous, restrictive or unusual nature or magnitude, or which
involves or would reasonably be expected to involve an obligation
of such a nature or magnitude, in each case which is material in
the context of the Cordiant Group taken as a whole;
(viii) waived or compromised any claim which is material in the
context of the Cordiant Group taken as a whole;
(ix) ceased or threatened to cease carrying on all or, to the extent
material in the context of the Cordiant Group taken as a whole, a
substantial part of its business;
(x) taken any corporate action or had any legal proceeding instituted
or threatened against it in respect of its winding-up,
dissolution or reorganisation or for the appointment of a
receiver, administrator, administrative receiver, trustee or
similar officer of all or any material part of its assets or
revenues or taken any analogous proceedings in any jurisdiction
or appointed any analogous person in any jurisdiction; or
(xi) entered into any agreement or arrangement or passed any
resolution or announced any proposal to effect any of the
transactions, matters or events referred to in sub-paragraphs (i)
to (x) of this paragraph (c);
(d) since 31 December 2002, save as Disclosed, no litigation, arbitration
proceedings, prosecution or other legal proceedings to which any
member of the Cordiant Group is or may reasonably be expected to
become a party (whether as plaintiff or defendant or otherwise) and no
investigation by any relevant authority against or in respect of any
member of the Cordiant Group, having been threatened, announced or
instituted or remaining outstanding by, against or in respect of any
member of the Cordiant Group which in any such case is or would be
material in the context of the Cordiant Group taken as a whole;
(e) save as Disclosed, no member of the WPP Group having discovered:
19
(i) that the financial, business or other information concerning the
Cordiant Group which has been publicly disclosed at any time
after 31 December 2001 or which has been disclosed to WPP since 2
May 2003, by or on behalf of any member of the Cordiant Group, is
misleading, contains a misrepresentation of fact or omits to
state a fact necessary to make the information contained therein
not misleading, in each case where the effect is to give a
materially misleading impression of the financial or trading
position of the Cordiant Group taken as a whole; or
(ii) that any member of the Cordiant Group is subject to any
liability, contingent or otherwise, which is material in the
context of the Cordiant Group taken as a whole; and
(f) the cancellation of the listing of Cordiant Shares and their removal
from the Official List and the cancellation of trading in Cordiant
Shares on the London Stock Exchange.s market for listed securities
having become effective, such that Cordiant is no longer subject to
the Listing Rules, before the date of the Court Meeting.
Unless the Scheme has become effective by 31 August 2003 (or any later date
which Cordiant and WPP may agree and the Court may allow), the Scheme shall not
become effective.
Subject to the requirements of the Panel, WPP reserves the right (but shall,
except as provided below, be under no obligation) to waive, in whole or in part,
all or any of the conditions contained in paragraph 2 above. WPP shall be under
no obligation to waive or treat as fulfilled (unless they have in fact been
fulfilled) any of the conditions in paragraph 2 above by a date earlier than 31
August 2003 notwithstanding that the other conditions of the Acquisition may at
such earlier date have been waived or fulfilled and that there are at such
earlier date no circumstances indicating that any of such conditions may not be
capable of fulfilment.
20
APPENDIX II
Definitions
The following definitions apply throughout this announcement, unless the context
otherwise requires:
"Acquired Debt" the Cordiant Debt purchased by WPP pursuant to the
Debt Transfer Agreement
"Acquisition" the proposed acquisition by WPP or any of its
subsidiaries of Cordiant Shares (other than any
such shares already held by any member of the WPP
Group) pursuant to the Scheme
"Act" the Companies Act 1985 (as amended)
"Bank Finance Parties" Cordiant's bank lenders under
the(pound)155,871,146.52 credit agreement dated 4
July 2000 between (amongst others) (1) Cordiant
and (2) HSBC Bank plc (as amended and restated)
"Code" the City Code on Takeovers and Mergers
"Conditions" the conditions to the Acquisition
"Cordiant" Cordiant Communications Group plc
"Cordiant Debt" or "Debt" the principal amounts due to the Lenders from the
Cordiant Group
"Cordiant EGM" the extraordinary general meeting of Cordiant to
be convened in connection with the Scheme
"Cordiant Group" Cordiant and its subsidiary undertakings
"Cordiant Shareholders" the holders of Cordiant Shares
"Cordiant Shares" ordinary shares of 50 pence each in Cordiant
"Court" the High Court of Justice in England and Wales
"Court Meeting" the meeting of Cordiant Shareholders to be
convened by order of the Court
"Debt Transfer Agreement" the debt transfer agreement dated 19 June 2003 and
made between, amongst others, (1) Cordiant, (2)
Cordiant Finance Inc., (3) HSBC Bank plc, (4) WPP
No. 2337 Limited and (5) WPP
"Effective Date" the date on which the Scheme will become effective
in accordance with its terms
21
"Former Lenders" the Bank Finance Parties and the Noteholders prior
to the acquisition of the Acquired Debt by WPP
pursuant to the Debt Transfer Agreement
"Lenders" the Bank Finance Parties and the Noteholders,
being WPP and the holders of the Remaining Debt
following completion of the Debt Transfer
Agreement
"Listing Rules" the Listing Rules of the UK Listing Authority
"London Stock Exchange" London Stock Exchange plc
"New WPP Shares" new ordinary shares of 10 pence each in the
capital of WPP to be issued, credited as fully
paid, pursuant to the Acquisition
"Noteholders" the holders of Notes
"Notes" the notes issued under the amended and restated
note purchase agreement dated as of 19 April 2002
among (1) Cordiant Finance Inc., as issuer, (2)
Cordiant as parent guarantor and (3) the
Noteholders
"Official List" the Official List of the UK Listing Authority
"Panel" the Panel on Takeovers and Mergers
"Placing" the proposed placing of new WPP Shares by way of
accelerated global tender
"Proposal" the proposal that WPP acquires Cordiant by means
of a scheme of arrangement under section 425 of
the Act
"Remaining Debt" the Cordiant Debt other than the Acquired Debt
"Scheme" the proposed scheme of arrangement under section
425 of the Act between Cordiant and the Cordiant
Shareholders
"Scheme Document" the circular to be issued by Cordiant to its
shareholders in connection with the Acquisition,
including the Scheme
"UBS Investment Bank" UBS Limited
or "UBS"
"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern
Ireland
"UK Listing Authority" the Financial Services Authority as the competent
authority for listing in the UK under Part VI of
the Financial Services and Markets Act 2000
22
"US" or "United States" the United States of America, its territories and
possessions, any state of the United States of
America and all other areas subject to its
jurisdiction, including the District of Columbia
"WPP" WPP Group plc
"WPP Group" WPP and its subsidiary undertakings
"WPP Shareholders" the holders of WPP Shares
"WPP Shares" ordinary shares of 10 pence each in the capital of
WPP
23