Rediffusion, Y&R go their separate ways after 24 years; WPP buys Madhouse

Indian partners Arun Nanda (right) and Ajit Balakrishnan (left) will now own 50% each in Rediffusion
A long-standing, bitter feud between a foreign advertising giant and partners of an Indian agency came to an end on Thursday when WPP, the world's largest advertising and marketing communications group, announced that it was exiting its 24-year joint venture with local agency Rediffusion.

Indian partners Arun Nanda and Ajit Balakrishnan, co-founders of Rediffusion, have acquired the combined 40 per cent stake of WPP agency Y&R (26.67 per cent) and Dentsu (13.33 per cent), wresting full control of the agency. Before the transaction, the agency was branded as Rediffusion-Y&R, which will now go back to being called Rediffusion.

The latest deal has also seen WPP exit the joint ventures it had in other areas with Rediffusion, including direct marketing and healthcare advertising, allowing the two former partners to chart their own separate paths in these segments, much like in advertising.

CVL Srinivas, country manager, WPP India, said, “India is a key growth region for us and we have a well-defined road map and vision for what we would like to achieve here.”

For Rediffusion, however, the gains are bigger, since it paves the way for the emergence of one of India's largest independent agencies. It is also the oldest independent agency in the country, having begun in 1973 with Nanda, Balakrishnan and Mohammed Khan as co-founders. While Khan exited Rediffusion to start his own agency Enterprise in 1983, the WPP era, which began in 1994, concluded only now following the exit of WPP's former chief executive Martin Sorrell. The latter was keen to buy out the stakes of Nanda and Balakrishnan in the agency and had even begun negotiations with the two partners three years ago, but it never materialized, sources said.

“Dentsu and Y&R were in a relationship in multiple markets, including India. After the exit of Martin Sorrell this year, that relationship has dissolved,” said Nanda. “We have now bought the combined 40 per cent stake held by the two in Rediffusion, taking our individual stakes to 50 per cent each from 30 per cent earlier,” he said.

The agency, the creator of iconic campaigns such as 'Give me red' for Eveready, 'the zing thing' for Gold Spot and 'Is it bad to look good' for Lakme, will now begin a new chapter, Nanda said, focusing on areas such as digital. “We have big plans in digital. Parallelly, we will rebrand the direct marketing and healthcare advertising units following the acquisition (of stake) and will compete directly with WPP in these areas,” he said.

WPP, on the other hand, will now have full leeway to develop Y&R as a wholly-owned agency in India, a market where it had no presence outside the Rediffusion JV. In addition, its brands Wunderman and Sudler, both of which were in JVs with Rediffusion in direct marketing and healthcare advertising, respectively, will be developed as wholly-owned agencies by the group, it said.

WPP also announced on Thursday that its media company GroupM was acquiring full ownership of mobile marketing agency Madhouse, where it has 50 per cent. This transaction is not related to the one with Rediffusion. With the WPP relationship behind it, Nanda said he was open to conversations with groups such as Publicis, Omnicom, IPG and even Dentsu for a possible strategic investment, provided there was a meeting of minds.