Freud sells major stake in PR firm

6pm: Matthew Freud has sold a major stake in his Freud Communications PR business to French ad giant Publicis. By Stephen Brook and Julia Day.

Matthew Freud has sold a major stake in his Freud Communications PR business to giant French advertising group Publicis, in a deal thought to value the company at £46m.

The owner of advertising agencies including Saatchi & Saatchi has acquired a controlling stake in Britain's biggest independent PR firm, which represents Walker's Crisps and AOL.

The deal leaves Mr Freud, its well-connected chairman and Rupert Murdoch's son-in-law, as the largest minority shareholder.

As part of the deal, Neil Blackley, the chairman of the Apax media advisory board who is a non-executive director of the PR group, will sell his 5% shareholding in Freud 2.0, the holding company of Freud Communications.

Two other non-executives, Alex Johnson and Michael Glynn, will also sell their stakes.

Mr Freud, who is married to Rupert Murdoch's daughter Elisabeth, will remain the key figure in the agency after the deal, which has been described by a source as "an acquisition but also a partnership".

He has sold just under 50% of his personal stake in the business, but will end up with a bigger shareholding in the remainder of the business because three non-executive directors are selling out.

The deal, which comes just days after Freud and Piers Morgan closed a deal to purchase Press Gazette, will be finalised in several weeks.

Freud Communications also represents Nike, KitKat and Nescafé and has seen burgeoning growth in its film and entertainment division, representing Sony Pictures Entertainment and Time Warner.

The deal will help the London-based agency expand internationally, with PR outfit hoping the might of Publicis, the world's fourth largest communications group, will help it to crack the US market.

"Matthew Freud is a unique and innovative presence in the world of British public relations," Maurice Levy, the chairman of Publicis Group, said today.

"Bringing him and Freud Communications into the Publicis Group fold will demonstrate to our clients - both British and global - our commitment to marshal the best and brightest skills to ensure their success."

"To be able to preserve and develop our business and culture but have the resources of the most creative global network will provide great opportunities for clients and staff alike," Mr Freud said.

"A partnership with the Publicis Group must be the ultimate goal for any independent marketing agency."

Freuds will make a profit of £4.6m this year.

Advertising background

It is not the first time an advertising agency has had a stake in Freuds.

Mr Freud established the business in 1984 and a decade later sold it to Abbott Mead Vickers.

But in 2001 - the same year he married Elisabeth Murdoch - Mr Freud led a £10m management buyout from Omnicom with Mr Blackley, Barclays Bank and other directors providing the financial backing.

Mr Blackley, the chairman of the Apax media advisory board and a former analyst at investment bank Merrill Lynch, became a non-executive director and 5% shareholder in Freud 2.0, the holding company of Freud Communications.

He has been a friend of Mr Freud since the early 1990s and introduced the PR consultant to Peter Mead, head of Abbott Mead Vickers.

Freud Communications' client list remains strong, with Nestlé, Nike, Pepsi, Bafta, Sky and Steve Coogan's Baby Cow on its books.

He and his right-hand man, vice chairman Kris Thykier, also deal personally with enfant terrible Chris Evans and have made efforts to diversify and grow the corporate client side of the business.

Part of the diversification was a link-up last year with one of the country's most successful start-up advertising agencies, Clemmow Hornby Inge, run by Johnny Hornby, half-brother of the novelist, Nick.

The new joint venture, Freud Inside, was a bid to provide public relations advice to clients of advertising agency CHI, which include Tango and the Telegraph Group.

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Stephen Brook and Julia Day

The GuardianTramp

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