FCB em­pow­er­ment deal

In­ter­na­tional share­hold­ers re­tain small ma­jor­ity stake

Finweek English Edition - - Advertising & marketing - BY TONY KOEN­DER­MAN tonyk@fin­week.co.za

THE OVER­SEAS share­hold­ers of FCB, SA’s largest ad agency group, have slashed their eq­uity hold­ing in the com­pany while trans­fer­ring shares to black in­vestors and staff of all races. The re­sult of an em­pow­er­ment deal an­nounced in the past week has been to lift black South African own­er­ship from 26% to 35%.

Iron­i­cally, the deal was made pub­lic a week af­ter FCB had to part com­pany with for­mer MD God­frey Mor­ley, a se­nior black ap­pointee who was lured away by an of­fer from a mar­ket­ing com­pany that the agency couldn’t match. How­ever, one of the ob­jec­tives of the new struc­ture is to make it pos­si­ble to lock in se­nior man­age­ment.

FCB is an of­fice of Draft-FCB, a global ad agency net­work owned by New York­based hold­ing com­pany In­ter­pub­lic Group (IPG).

FCB’s em­pow­er­ment level puts it well ahead of the of­fi­cially ac­cepted black eq­uity tar­gets for the mar­ket­ing in­dus­try of 30% by 2009 and 45% by 2014.

Key to the re­struc­tur­ing was a de­ci­sion by IPG to re­duce its hold­ing from 74% to 50,1%. South Africans hold the re­main­ing 49,9%, ei­ther through a black em­pow­er­ment ve­hi­cle (Bourasque) or through a staff trust, whose ben­e­fi­cia­ries in­clude both blacks and whites.

“Th­ese shares have been given to the trust – free of charge – by IPG,” says lo­cal agency CEO Neil van der Weele. “They re­alised the im­por­tance of the deal as a means of re­tain­ing key staff. SA is one of the jew­els in the FCB crown, one of the top five in rev­enue” – even though its money is earned in rand.

Van der Weele says man­age­ment’s wish list when it ap­proached cor­po­rate head­quar­ters was to place more shares in the hands of South Africans. “Our main ob­jec­tives were: the abil­ity to move shares around among black share­hold­ers; to put more shares in SA hands; more shares for staff, both black and white; staff to take own­er­ship of the com­pany; im­prove our black em­pow­er­ment ra­tio; broader-based em­pow­er­ment.

“We wanted to re­in­force the own­er­ship men­tal­ity among our staff. We can now at­tract heavy­weight new tal­ent. There are now 70 staff share­hold­ers in the trust, of whom 30 are white and 40 black.”

Al­though FCB South Africa is part of a global agency group, only 1,4% of its busi­ness comes from the group’s in­ter­na­tion­ally aligned clients. “We’re a com­pany rooted in South African busi­ness,” says deputy chair­man Nk­wenkwe Nkomo. “Al­most 99% of our rev­enue comes from lo­cal sources.

“We were look­ing for a com­plete re­ver­sal – 74% in SA hands – but had to settle for just short of a ma­jor­ity. It’s a time for us to re­flect se­ri­ously about the com­mu­ni­ca­tions in­dus­try. It’s crit­i­cal for this in­dus­try to be in the hands of South Africans.”


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