WPP arms fight over Bates-Sercon deal

New Delhi, Mar 28 | Updated: Mar 29 2007, 06:58am hrs
Two arms of global communications major, $6-billion WPP Group Plc, are at loggerheads in the Foreign Investment Promotion Board (FIPB) over acquisition of an Indian company by one of the arms.

Rediffusion DY&R--a WPP group agency--has approached the FIPB with an objection to Bates Asia--a wholly owned subsidiary of WPP--acquiring Sercon, a leading marketing services company in India.

Young & Rubicam Inc (Y&R) and Bates Asia are both wholly-owned subsidiaries of WPP. DY&R owns 26% of Rediffusion. Sources told FE that Rediffusion has filed its objection with the FIPB saying the deal will jeopardise its interests and is violative of the Press Note 1 of 2005. FIPB is expected to hear the case on Thursday.

Interestingly, Showdiff, a company owned by former cricketer Ravi Shastri, where Rediffusion owns a 49% stake, has also filed its objections before the FIPB, sources said.

At Loggerheads

Rediffusion DY&R has approached the FIPB with an objection to Bates Asia acquiring Sercon, a leading marketing services company in India
Rediffusion has filed its objection with the FIPB saying the deal will jeopardise its interests
Bates India is currently in the process of merging Sercon with its brand 141 to form a stronger brand under the banner 141 Sercon

Bates-Sercon will directly clash with the interests of Rediff DYR's Showdiff in the same space, an industry source said. When contacted Subhash Kamath CEO of Bates India was reluctant to comment on this subject. According to industry sources, Bates India is currently in the process of merging Sercon with its brand 141 to form a stronger brand under the banner 141 Sercon. Sercon 141s services will include events and sport management.

According to the Press Note, a foreign company with an existing joint venture in India will necessarily have to obtain a no-objection certificate from its Indian partner before getting into another venture in the same field of business. This was intended as a protection for the joint venture partners from such conflicts of interest.

Sources said, so far, Rediffusion has not given an NOC to Bates Asia to go ahead with the Sercom deal. It was in December 2006 that Bates Asia announced its plan to acquire Sercon with an objective to merge it with Bates Indias existing marketing services brand 141.