Telstra Win Boosts George Patterson
Sydney Morning Herald
Thursday May 15, 2003
Australia's second-largest advertising agency, George Patterson Bates, will wrap up its management buy-out within the next few days, after it incorporates its Telstra direct marketing win into negotiations with investment firm Pacific Equity Partners.
Patterson has shifted from industry victim to aggressor this week, pulling out of the Optus pitch to take up the Telstra business, retaining the majority of the Tourism NSW account and already believed to be investigating new business opportunities.
The agency will soon be known as George Patterson, dropping the name ``Bates" as it seeks to extricate itself from Cordiant's global advertising network. Cordiant Australia, which also includes Zenith Media, Professional Public Relations, HMA Blaze and 141, will revert to its former name of The Communications Group Holdings, once the deal with Pacific Equity Partners is signed.
While Patterson has enjoyed its best week in probably two years, its sister agency, Zenith Media, has suffered the Optus loss with no Telstra gains. Optus appointed Mitchell Media's Media First subsidiary, as well as M&C Saatchi.
Zenith also lost the $120 million Coles Myer business to Universal McCann last week, the Insurance Australia Group account in March and National Australia Bank in December.
``No-one likes losing business but none of this has come as a complete surprise," Zenith's chief executive Anne Parsons said. ``Are we here slashing our wrists? Absolutely not."
Zenith was preparing a transformation under the new Pacific Equity Partners ownership, she added, saying that many reviews were putting such pressure on media agency margins and revenue that unrealistic costs were likely to implode.
She was not happy that Optus's procurement division had assessed the costs that each agency had quoted.
Optus said its review was not about cost for its advertising agency nor media buyer. ``Value for money was a factor but not the determining factor," said Optus director of corporate marketing, Stephen Cameron.
Cordiant Australia chief executive Ian Smith would not comment on the agency's future yesterday as it is yet to complete negotiations with Pacific Equity Partners.
The Australian operation is keen to separate immediately from its troubled parent, Cordiant, the share price of which fell to just 7p this week following news that its own talks with potential buyers had failed.
Pacific Equity Partners is believed to have requested that former George Patterson chief Alex Hamill return to the agency. He will take up the role of executive chairman but insists that Mr Smith will remain in charge.
``I have no intention of going back into advertising," Mr Hamill told the Herald. ``I have committed to Ian Smith that I would support him." His return was ``not because PEP instigated but because Ian instigated", he added.
Telstra said it had begun talks with Patterson ``a few weeks ago" and the work that the agency would conduct would be in areas previously kept in-house: segment modelling, customer relationship marketing and targeted campaigns.
Telstra managing director of consumer and marketing, Ted Pretty, said the company was now spending as much on direct marketing agencies as it did on advertising, if media costs were excluded.
Patterson would not be added to Telstra's current review of its mainstream advertising account, however.
``We didn't feel it appropriate to reopen that [review]," Mr Pretty said. ``We saw the real value that George Patterson Bates would provide us would be below-the-line [direct marketing]."
© 2003 Sydney Morning Herald