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Does Bell’s exit strategy Chime with reality?

How ironic, you might think, that a momentous development at the UK’s leading PR company should only come to light through an untimely leak.

Lord (Tim) Bell and Piers Pottinger, respectively chairman and deputy chairman of Chime Communications, are plotting their exit from the publicly-quoted company by means of a £20m buyout of part of Chime’s PR business.

How do we know this? Because Sky News City editor Mark “Scoop” Kleinman divulged it on Twitter yesterday. Interestingly, Chime did not deny the Tweet, merely noting in its statement that the two marketing veterans (they are 70 and 57 respectively), together with other, unnamed, members of the management team, may “pursue the possibility of … acquiring some of the businesses within the public relations division.” Significantly, no mention was made of the £20m figure that Kleinman had bandied about.

Whatever could this mean? The first thing to note is that £20m would not be nearly enough to buy out Chime’s PR activities, or even – it might be thought – the headline element of them, Bell Pottinger.

Admittedly things are not what they used to be in that division, ever since Bell Pottinger lost its biggest contract with the US government last year (the State Department Middle East one). Even so, and allowing for the depressing impact this loss will have had on growth, PR is still a very substantial part of what Chime does for a living. In the first half of last year, it was about 42% of group income. And, although full-year figures may soon put us right on this matter, there is no good reason to believe the sector is sinking fast. Chime, allowing for fluctuations in its share price, currently has a market capitalisation of about £165m. So a value of about £65m for the total PR business (before taking into account any premium to whet shareholders’ appetites) would seem not too wide of the mark.

True, other elements of the company’s profit stream are beginning to take up the slack left by PR. Sports marketing, in particular, can be expected to do sterling service in the year of the London Olympics. It is also well placed to capitalise on the World Cup of 2014 and the 2016 Rio Olympics. Advertising, in the guise of those meerkats at VCCP, is performing solidly. And even market research, mainly Opinion Leader, is described as in recovery mode.

That said, Chime without Bell Pottinger would be Hamlet without the Prince: surely inconceivable.

So what has been going on? Perhaps Chime chief executive Chris Satterthwaite had been discreetly readying a lifeboat, so the two veterans could slip overboard into the sunset of their years, taking with them some part of the PR business as booty. (It should be noted that Chime has a number of PR sub-brands, among them Harvard, Pelham, Good Relations and Ptarmigan – although it is near impossible to determine their individual profitability.) All this as a prelude to “repositioning” the business after Bell’s departure. That at least is financial specialist Bob Willott’s explanation of known events so far.

No doubt about it, Margaret Thatcher’s former adman is still a name to open doors around the world. But he is also a man who, not so long ago, had a triple heart-bypass. The issue of his retirement is not something that he, or the rest of the Chime board, can duck for much longer.

Leaks rarely happen entirely by accident. It may be one side felt that negotiations weren’t going as well as expected, and decided to accelerate the process. If so, the tactic seems to have backfired. The unexpected news of Bell’s possible departure has simply left shareholders baffled. “It makes no sense,” said one. “One day Tim’s leaving, the next day – an acquisition. It’s chaos.” Chime has just announced it is buying Succinct Communications.

UPDATE 4/2/12: Two-thirds of Bell Pottinger’s income in 2010 (the last complete record) came from the Middle East, according to Marketing Services Financial Intelligence, published by Bob Willott. Put another way, that’s 27% of Chime’s total revenue. Willott suggests that Chime’s increasing dependence on the Middle East for its PR revenue is an important factor in the buyout negotiations.

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