MONTREAL and TORONTO -- They are long-time friends. Together, as partners, they built one of Canada's most successful advertising and public relations agencies.
Now they are pitted against one another.
Claude Lessard and François Duffar have worked side by side for almost 35 years, sharing a vision that became Cossette Inc. That was until Mr. Duffar, a former vice-chairman and president of Cossette, suddenly stepped down in May.
Now, Mr. Lessard finds himself fending off a hostile takeover bid for Cossette led by Mr. Duffar, his former partner at a firm that had gone from success to success as it added clients such as General Motors of Canada Ltd. and Bell Canada to its blue-chip roster.
The set-to is shaping up as a bitter clash for control of Cossette - one of the few advertising agencies in Canada to be publicly listed. It is a stunning break from the outwardly quiet Canadian ad world.
Cossette's shares soared almost 60 per cent yesterday after Mr. Duffar's group, Cosmos Capital Inc., which includes another former Cossette senior executive, former BCE Inc. head Jean Monty and Burgundy Asset Management Ltd., announced the blockbuster news of its $4.95-a-share all-cash offer. The deal is valued at $82.7-million, which some observers said undervalues the company.
Cosmos already controls 18.7 per cent of Cossette's outstanding shares.
The takeover bid, some observers say, is consistent with a perception in the ad industry that Cossette has seen better days and requires a major shakeup if it is to recapture its glory days.
The current economic slowdown, which has hurt corporate advertising budgets, hasn't helped.
Mr. Lessard, Cossette's chairman, president and chief executive officer, met with other board members yesterday to study the offer and appoint a committee of independent advisers.
"We're going to put things in motion to deal with this proposal," said Marcel Barthe, vice-president of corporate strategy.
Mr. Duffar said in a statement that a "reorganization of its resources and capital will lead to a more efficient and dynamic Cossette."
The other senior Cossette executive on the takeover team is Georges Morin, a senior vice-president who resigned just last Saturday.
The fact that the share price has been trading in the $2 range lately - down from $12 when the company went public in mid-1999 - is also a telling sign, they say.
"It's quite clear that Cossette is not the once-great ad agency it once was," says Mark Sherman of Media Experts, a Montreal media buying agency.
Alek Krstajic, head of new wireless entrant Public Mobile Inc. and the former chief marketing officer for consumer markets at Bell, says he believes Cossette suffered after Mr. Duffar eased out of various key responsibilities before his final break in May. "I think the company really lost its way without Duffar," he said.
Last year, the firm lost the key Bell account - Cossette was behind the Bell television campaign featuring talking beavers Frank and Gordon - although it continues to provide some communications services to the telecom giant. It has had some success in London with a few clients it acquired there. But its expansion in the United States has garnered mixed reviews. And it has been losing dozens of top employees to other firms.
Alan Middleton, a marketing professor at York University's Schulich School of Business, said the bid shows just how strained relations between the former partners have become.
"This is, in one way, sad, because Cossette, before they went public, was a great example of the concept of a partnership applied to marketing. But, you know, in every family after 10 years of marriage, things look a little different."
It's unfortunate their differences had to come to this, because the fight risks becoming destructive, Prof. Middleton said. If it ends up as a protracted battle for control, some jittery clients might head for the exits and find another place to park their increasingly scarce ad dollars, he added.
The takeover will shake up an industry unused to these kinds of bids, he said, saying the move could also threaten Cossette's dominant position in the industry. "It will depend on how long and bloody it is."
COSSETTE INC. (KOS)
Close: $5.15, up $1.90
© The Globe and Mail
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.
