Peter Hunter is a man who doesn’t give up easily. Three years ago, Hunter—chairman of Toronto-based McConnell Advertising—was thwarted at the last moment in his takeover run at Canada’s only publicly traded ad agency, Cockfield Brown Inc. Now he’s back again and Cockfield’s attempts to stay out of his arms have pitted four of the country’s leading agencies and a large health-care firm in a legal and securities battle which, in the end, may produce no victors save the quibbling lawyers.
Going public seemed like a good idea for Cockfield in 1970. It was a time when all large agencies were dreaming of expanding into minimedia empires. A stock offering looked like a good way to finance growth. But unlike the major U.S. firms who went similar routes, Cockfield’s senior executives let control of the company slip out of their hands. Says Hunter:
“They’ve been looking over their shoulders ever since.”
His direct bid rebuffed in 1978,
Hunter took a different course this time. Last week it became apparent that the combatants may face months of trench warfare. It began in late July when
Hunter began buying shares at about $4 each, quietly, with no real plan in mind. Unknown to Hunter, Calgary adman John Francis, president of Francis Williams and Johnson (FWJ), Alberta’s largest ad agency, also had been picking up Cockfield shares in an attempt both to get larger and to gain a foothold in Eastern Canada. Francis telephoned Hunter (who mistook him for a while as a nephew who bears the same name) and, not knowing Hunter was buying Cockfield too, proposed a meeting. During the Thanksgiving weekend the two met in Hunter’s Toronto office, discovered their mutual interest, pooled their shares (giving them 33 per cent of Cockfield) and agreed to make their move together.
At Cockfield, senior management ran for a white knight. Apparently fearing
that Hunter’s plans for the agency did not include jobs for them, they picked a most unlikely savior—health care giant Extendicare Ltd. Two days after Hunter-Francis proposed a merger of McConnell, FWJ and Cockfield, Cockfield President Rick Gallop announced that Extendicare had purchased a block of 126,667 shares from Cockfield’s management and had been given an option on a further 100,000 specially created treasury shares. If picked up, Extendicare would hold 48 per cent. HunterFrancis, whose position in Cockfield would drop to 28 per cent with the option, termed the new treasury issue
“immoral” and is fighting it, so far unsuccessfully.
The fight may, in fact, be over shadows. If Hunter succeeds this time, he may have paid $3 million for an empty shell. The only assets Cockfield has are its employees and clients. Says Mark Smyka, news editor of the trade journal Marketing“. “Their inventory goes down the elevator every night.” Many of Cockfield’s key people say that if Hunter wins, they—and perhaps many of their clients—will leave.
Extendicare’s president, Harold Livergant—who also controls 49 per cent of the Jerry Goodis Agency—says he plans to use Cockfield to build up a large comgmunications conglomerate. But ^ad agencies, with their thin and erratic profit margins, may not fit readily into a corporate mane. Cockfield, for example, despite its good reputation and bluechip clients such as Molson, Imperial Oil and Sony, showed only a $304,000 profit on $75 million worth of billings in 1980.
Hunter has taken a new tack to precipitate a conclusion. He has requested the Cockfield board call a § special shareholders “^meeting. Under law, the board has three weeks to set a date. There, he hopes to woo the owners of about 150,000 shares not allied to either group.
For his part, Livergant (whose Extendicare has bid $5.25* for all the shares) argues that his management skill could lead to a smoother-running operation. “We can be successful so long as we remember that the actual delivery of the service is left in the hands of the professionals who know the business best.”
For the ad community, accustomed to fighting for a share of the consumer’s mind, this fight is weeks away from conclusion. Says Hunter: “The two contestants are virtually neck and neck. It’s about a toss of a coin.”
* While the results of the hid, which expired Dec. 25, are not known, it is unlikely to have had many takers with shares trading near $7.25.
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