Organic Restructures, In Talks With BBDO

Omnicom agency BBDO Worldwide Thursday said it is in talks to establish only what it would call a “strategic alliance” with San Francisco-based interactive shop Organic.

The two companies disclosed few details of their proposed agreement, although it involves a specific pact between Organic and BBDO’s own online agency, @tmosphere. According to a statement by BBDO Worldwide’s chairman and chief executive, Allen Rosenshine, the talks are aimed at creating integrated digital marketing “solutions.”

“We have known and worked with Organic for several years and share significant client relations,” Rosenshine said. “Digital media represents an important means for enriching customer relationships and delivering sophisticated marketing messages. We are hopeful that these discussions will lead to the development of even more effectively integrated marketing solutions for both existing and new clients.”

Spokespeople declined to say whether the talks were about merging Organic with @tmosphere.

If the talks do center around a merger, then they’re not without precedent. BBDO’s parent company, Omnicom, is Organic’s second-largest shareholder, with a 17 percent stake in the firm (company insiders jointly represent the company’s largest shareholder). Additionally, BBDO and Organic have several large clients in common, including General Electric, Daimler-Chrysler and British Telecommunications.

In a separate statement, Organic chief executive Mark Kingdon gave little clue as to the nature of the agreement talks with BBDO, though he did concede that his company is looking at working closer with undisclosed parties.

“We are … actively expanding our marketing alliances with key partners while we examine new strategic and financial relationships with several companies which compliment our integrated service offering and further enhance our skill sets and client network,” he said in the statement.

Like many in its sector, Organic has been hard hit by flagging revenues as dot-com clients go under and traditional marketers cut their online budgets. Thursday, the firm said it would restructure its organization to better correspond with this reduced demand, cutting about 35 percent of its staff, or 300.

As a result of the cuts, Organic said it expects to take a restructuring charge of $17 million to $20 million during the first quarter.

“While our long-term outlook remains optimistic and our business development reorganization efforts are gaining momentum, current market conditions have dictated that we act decisively now,” Kingdon said. “By eliminating overcapacity across our network to better meet the immediate demands of the market, we anticipate realizing annual savings of approximately $50 million through improved utilization and lower selling, general and administrative expenses.”

Kingdon also hinted that the firm would consider future efforts to cut overhead, though he did not specify exactly what those efforts might be.

“We believe these changes will provide a solid foundation upon which to continue to build for the future,” he said.

While Organic maintains it has its long-term house in order, more pressing issues are at hand. The company said it received a notice that Nasdaq would be reviewing its listing on the stock exchange, unless it can boost its minimum bid price to a dollar.

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