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Monday, Jan 06, 2003

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Leo Burnett to raise stake in Indian venture

Ambarish Mukherjee
Nithya Subramanian


LEO Burnett Worldwide Inc is planning to increase its stake in Leo Group India through a buy-back offer.

The foreign parent currently holds 74 per cent equity in the Indian advertising agency, while a Mauritius-based overseas corporate body (OCB), Black Pencil Mauritius Ltd, has a 20 per cent holding and a resident Indian accounts for the remaining six per cent.

According to the company's plans, Leo Burnett Worldwide will acquire 2.52 per cent of the company's equity from the Indian shareholder to be followed by a buy-back offer to the existing shareholders.

However, the foreign investors have already decided not to participate in the buy-back due to the long-term strategic relationship and keeping in mind their continuing commitment to develop business in the Indian advertising market.

Depending on the response, the equity stake of Leo Burnett Worldwide could go up to 79.28 per cent.

Currently, Leo Burnett India pays a five per cent fee for technical services and an eight per cent multinational client services fees to Leo Burnett Worldwide and Starcom Mediavest Group.

The group has identified India, China and Vietnam as the three key markets where it sees maximum potential, especially in the Asia-Pacific region. India has contributed 10 per cent ($70 million) of the $700 million worth of business that the Asia-Pacific region generated for Leo Burnett. This is however, just one per cent of their global business.

The company has big business plans for the next two years. It is targeting billings worth $100 million and expects growth mainly through specialist media divisions. It has already started a specialised entertainment division, an interactive division and picked up stake in a market research agency, among others.

It is also planning to leverage its expertise in the foods category.

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