BUSINESS

Cossette hopes to double U.S. presence with sale to China's BlueFocus

12/15/2014 10:39 EST | Updated 02/14/2015 05:59 EST
MONTREAL - The parent company of Canadian ad agency Cossette hopes to double its U.S. presence in the next five years with the support from its new majority owner, China's leading communication and marketing firm.

"The kind of acceleration we saw in the 1990s with Cossette I would expect in the next five to 10 years," Vision7 International CEO Brett Marchand said in an interview.

BlueFocus Communications announced a deal Monday to buy an 85 per cent stake in the Vision7's North American business from several shareholders including U.S. private equity firm Mill Road Capital for $210 million.

The remaining stake will be held by Vision7's existing management team which will increase its ownership stake to 15 per cent in the company from less than 10 per cent.

The Beijing-based company will also make unspecified investments to support Vision7's growth and use the agency to grow its North American presence.

Marchand said the new partnership should allow the Canadian advertising company to return to its glory days when it became Canada's largest independent advertising and communications agency with offices across Canada and into the United States.

That was before Cossette hit hard times and it faced the financial meltdown and a hostile takeover bid in 2009.

"We haven't done that (type of expansion) for the last five years because we have focused on making the business strong and the foundation better, but that is actually where the growth is going to come for the next five years," Marchand said.

U.S. private equity firm Mill Road Capital acquired a 60 per cent stake in Vision7 in 2009 for $135.3 million, including both the North American and European operations. The remaining 40 per cent was owned by a number of shareholders including Cossette's founders and managers.

The Connecticut-based firm announced in May it wanted sell Vision7's North American business, but would remain a majority owner of the European operations, which account for about one-third of Vision7 International.

Vision7 International, which has nearly 1,300 employees, including some 950 in Canada and the U.S., will remain headquartered in Quebec City.

With its new owners, Vision7 will target growth in e-commerce, data and key technology sectors such as mobile, which are expected to be the future growth engines for the advertising industry.

BlueFocus will help Vision7 clients like Proctor & Gamble to sell more in emerging markets and China, while Vision7 will help Chinese firms to expand their North American presence.

"Having Vision7 join the BlueFocus family will help us gain better access to the North American market and emphasizes our 'To Be Global' strategy," stated Oscar Zhao, CEO of BlueFocus Communications Group.

Queen's University marketing professor Kenneth Wong says the deal is the latest of a series of transactions in which Canadian ad agencies were purchased by international companies.

While he found it surprising that a Chinese firm would use a Canadian agency to extend its U.S. presence, Wong said the deal could help the expansion plans of Cossette and its new owners.

"(BlueFocus) may find that this is necessary to support the demands of some of their domestic Chinese clients and ... this could obviously give Cossette a leg up on penetrating the Chinese market."

BlueFocus, which was founded in 1996, has shares traded on the Shenzhen Stock Exchange and more than 3,500 employees around the world.

Its clients including companies such as L'Oreal, Estee Lauder, Pepsi, Siemens and ABB. It also has Asia's largest PR agency and China's top online gaming advertising agency.

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