Saturday, November 22, 2014

Chinese communication company in talks to buy Canada's Cossette

A view of Cossette Inc. offices in Quebec City, Nov. 10, 2009. (MATHIEU BELANGER/REUTERS)
A view of Cossette Inc. offices in Quebec City, Nov. 10, 2009. (MATHIEU BELANGER/REUTERS)

A Chinese communications company is in talks to buy a legendary Canadian ad agency, according to sources.

Beijing-based BlueFocus Communications Group is in talks to acquire assets from ad agency Cossette’s parent company, Quebec City-based Vision7 International, according to sources.

Rumours surfaced recently that BlueFocus, which has recently embarked on a strategy to expand its presence in North America and Europe, was close to a deal involving the Canadian company, which went private in 2009 with the backing of Connecticut-based private equity firm Mill Road Capital LP.

“They’re looking very closely at Cossette,” said Greg Paull, principal at marketing consultancy R3 Worldwide, which is based in China and has been advising BlueFocus on acquisition targets. BlueFocus has a track record working with multinational clients in China including Procter & Gamble Co. and Coca-Cola Co.

“They want to become a global holding group in the spirit of Dentsu [Inc.] and WPP [Group PLC],” Mr. Paull said. “...Their vision is to become a true global communications firm.”

Mill Road confirmed this summer that it “has decided to explore strategic alternatives for [Vision7’s] North American assets.” Vision7 also has a presence in the U.K. It is unclear whether the entirety of the company’s assets would be included in a possible deal.

On Wednesday, trade publication Adweek pegged the value of the acquisition at $220-million (U.S.), citing unnamed sources.

Last year, BlueFocus acquired London, U.K.-based social media agency We Are Social, and bought a 20 per cent stake in London-based PR firm Huntsworth. This summer it looked to the U.S. with a majority stake in San Francisco design company Fuseproject. BlueFocus chief executive Oscar Zhao has said that the company has set aside $300-million (U.S.) for further acquisitions in the West.

“Canada definitely is part of” the company’s acquisition plans, said Holly Zheng, president of BlueFocus International, in an interview.

“Canada is a big country – and plus, Canada has a good relationship with China,” she said.

Asked about Cossette, she said: “that particular name, we probably won’t be able to comment until anything gets concrete.”

She said “we will potentially be interested in anything on the market.” But nothing is firm until the ink dries. “Something true tonight can be gone tomorrow. So who knows.”

Ms. Zheng said it’s not clear exactly how new acquisitions would be treated – whether they would be rolled in to the larger company, or left to stand alone. “We are still learning ourselves, to be very honest. We are new to the field,” she said.

BlueFocus is flexible enough that additions to its portfolio can remain intact for some time, “responsible for their growth, for their business.” But it also hopes for synergies, for example between design and public relations firms.

Part of the hope is to take expertise from North America and bring it back to China, such as with data mining or analytics firms that “might still be ahead of some of the players in China. If we can bring their technology here to serve customers in this market, that will be great,” she said, speaking from Beijing.

BlueFocus wants to “invest heavily in the new stuff – big data and technology companies,” she said, alongside its pursuit of global reach and more traditional business.

“This is the company’s vision,” she said.

Mill Road, which owns a majority stake in Vision7, confirmed in July that it is looking to sell. The firm declined to comment for this article.

Vision7 CEO Brett Marchand declined to comment on the possibility of a deal with Blue Focus.

“In July, 2014, it was announced that Mill Road started to review strategic alternatives for its majority holdings in Vision 7 International’s North American assets. That process is continuing and we are unable to comment further at this stage,” Mr. Marchand said in an e-mailed statement.

Vision7 owns Cossette, as well as media planning and buying services. It has a public relations, social media and experiential marketing division called EDC, which encompasses agencies such as Elvis Communications and Dare. These agencies have a presence in the U.S., Canada and Britain.

The creation of Vision7 in 2009 sprung from a battle for control between partners Claude Lessard and François Duffar for Cossette Inc., which was publicly traded at the time. With the money from Mill Road, Mr. Lessard won the fight and took the company private.

Mill Road’s investment, typical of private equity deals, was not meant to be long term.

“They won’t be there for 20 years,” Mr. Lessard said in an interview with The Globe and Mail last year. “There will be a time when we’ll have to look at other options.”

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