FCB empowerment deal
International shareholders retain small majority stake
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.”