WPP-Backed Chime Cuts Ties With Bell PottingerBy
Chime said to return 27% stake to embattled London PR firm
HSBC, Carillion defect; Sabadell reviews Bell Pottinger role
One of Bell Pottinger LLP’s biggest investors has severed ties with the embattled public-relations firm, along with a growing list of corporate clients that are deserting the U.K.-based company as it attempts to weather a reputational crisis. Bell Pottinger is evaluating options including a possible sale.
In an effort to distance itself from Bell Pottinger, Chime Communications Ltd, co-owned by advertising giant WPP Plc and Providence Equity Partners, returned its 27 percent stake in the London-based PR firm without compensation about two weeks ago, according to a person familiar with the matter who asked not to be named discussing details of the decision.
“We no longer have a stake in Bell Pottinger,” Chime said in an emailed statement.
Clients including banking giant HSBC Holdings Plc and construction firm Carillion Plc will no longer work with Bell Pottinger, the companies said Tuesday. Spain’s Banco de Sabadell SA, while still a client, is reviewing its relationship, according to a person familiar with the matter.
The crisis gathered pace this week after an investigation found Bell Pottinger ran a potentially divisive social-media campaign in South Africa on behalf of the controversial Gupta family. The firm was thrown out of the U.K. public relations industry body in an unprecedented rebuke by the Public Relations and Communications Association. Along with the client defections and Chime’s pullback, at least one partner has left the firm, according to a person with knowledge of the matter.
Co-founder Timothy Bell told BBC’s Newsnight program on Monday that the agency is unlikely to survive. The company announced on Tuesday that it had hired accounting and consulting firm BDO “to look at all options regarding the future of the business,” according to an emailed statement.
‘Nearing the End’
“It’s probably nearing the end,” said Bell, who formed the firm in the 1980s after advising Prime Minister Margaret Thatcher on media matters. “You can try and rescue it but it won’t be very successful." Bell left last year, citing the controversy over the Guptas as one of the reasons.
Bell Pottinger didn’t respond to an emailed request for comment on the client defections or Chime’s stake, which was reported earlier by the Guardian. The firm said earlier that it accepted there were “lessons to be learned” and that it would abide by the PRCA code of ethical conduct on a voluntary basis. Many employees didn’t work on the account for the Guptas’ Oakbay Investments Pty Ltd. and would consider applying for individual membership, the company said.
Bell Pottinger was found to have broken four clauses of the PRCA’s code of conduct and professional charter while working for the Guptas, who are friends with President Jacob Zuma and in business with his son. The rules state that members shouldn’t cause racial offense with their work and "deal fairly and honestly" with the public at all times.
A spokeswoman for Carillion told Bloomberg the company is no longer working with Bell Pottinger, though declined to comment on reasons why or precise timing. Bell Pottinger had issued press materials on Carillion’s behalf as recently as mid-July.
“We have used Bell Pottinger for specific projects in the past but will not be doing so in the future,” HSBC said in an emailed statement.
Sabadell declined to comment.
Chime’s decision to abandon its stake, valued at about 5 million pounds ($6.5 million), followed a 2016 effort to explore options for the Bell Pottinger holding, the Guardian reported earlier. Providence owns 75 percent of Chime with WPP, led by Chief Executive Officer Martin Sorrell, holding the remainder. Chime was taken private in 2015 in a 347 million-pound deal.
“Chime is clearly walking away from a bad situation,” said Paul Sweeney, a Bloomberg Intelligence analyst. “It appears that Chime’s co-owners, Providence Equity Partners and WPP Group, sense the reputation risk is not worth the relative small cost to write down their investment.”
The agency has attracted attention in the past for taking on controversial clients like former Chilean dictator Augusto Pinochet’s foundation. According to a 2016 report by the Bureau of Investigative Journalism, a U.S.-funded anti-Al-Qaeda propaganda campaign that Bell Pottinger carried out in Iraq included fake insurgent videos used to track those who accessed them.
Cie Financiere Richemont SA, the luxury-goods company controlled by Johann Rupert, South Africa’s richest man, ended a contract with Bell Pottinger last year. Rupert, who has a net worth of $8 billion, told the annual meeting of his investment company Remgro Ltd. that he had been a target of the company’s social media campaign, Johannesburg-based Business Day reported on Dec. 2.
Investec Plc, which owns a bank and an asset manager in South Africa and the U.K., also dropped Bell Pottinger last year. Several current clients, including investment manager St. James Place, grocery chain Waitrose Ltd. and recruiting firm Hays Plc declined to comment.
— With assistance by John Bowker, Stephen Morris, Lukanyo Mnyanda, Thomas Seal, and Angelina Rascouet