29oct2004

Sorrell takes WPP deeper into Russia

<p>WPP, the advertising giant, is in advanced negotiations with Video International, a Russian firm founded by an adviser to president Vladimir Putin, in a bid to create Russia?s biggest advertising agency business.</p>

WPP, the advertising giant, is in advanced negotiations with Video International, a Russian firm founded by an adviser to president Vladimir Putin, in a bid to create Russia’s biggest advertising agency business.

Video International makes most of its money from media buying, but also owns a number of advertising agencies. Under the plans, these agencies would be merged with WPP’s Russian operations to create a new joint venture company known as WPP Russia. The joint venture would be expected to have annual revenues of about $30m (?16.3m).

WPP, which is led by Sir Martin Sorrell, the chief executive, would have a 51 per cent stake in the joint venture and is paying several million dollars to Video International to ensure that it is the senior partner in the new company. Video International was founded by Mikhail Lesin, a former minister for press and information, who has since become an adviser to Putin. Lesin has said that he no longer has any financial interest in Video International and has had no hands-on involvement since 1994.

Video International has 13 major shareholders, thought to include well-known Russian businessmen. The company has until recently held a media-buying monopoly, working exclusively with Russia’s two largest state-owned television channels, First Channel and Rossiya. However, two months ago it was forced by the government to choose between the two and it now no longer works with Rossiya.

WPP first considered working with Video International in 1997, but the talks broke down. An executive familiar with the deal said: "It would create quite a powerful business in Russia."

The Russian joint venture is just the latest in a series of partnerships that WPP has been building in recent months. Last week WPP announced it has formed a multinational joint venture with VNU of the Netherlands to produce television viewing figures in 30 countries. WPP is also one of the potential bidders for Grey Global, the US-based advertising group, which is thought to be worth around $1.3bn.

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