Chiat/Day Says 'G'Day, Mate' : The L.A. ad house seeks to buy an Australian firm--making it the West Coast's first $1-billion agency.

By BRUCE HOROVITZ

Jan. 10, 1989 12 AM PT

Times Staff Writer

Chiat/Day, a feisty and fast-growing Los Angeles advertising agency that creates ads for Nissan and Reebok, said on Monday that it has reached a preliminary agreement to acquire Mojo MDA, Australia’s largest advertising agency, for an estimated $77 million.

The acquisition--if approved by Mojo shareholders--would make Chiat/Day the West Coast’s first $1-billion ad agency, as measured by billings, and catapult it into the ranks of the nation’s 20 largest agencies.

Founded in Los Angeles 21 years ago, the firm would also change its name to Chiat/Day/Mojo. The agreement would add an estimated $300 million to the firm’s client billings and its payroll would jump to about 1,200 workers worldwide from 750.

Mojo creates ads for Qantas, the Australian airline that has long used the sad-faced koala in its advertising. The agency also helped boost Australian actor Paul Hogan’s career with ads for the Australian Tourist Commission.

“This is a very, very obvious move,” said Jay Chiat, chairman of Chiat/Day, in an interview Monday. “We’ve worked hard to become a very large creative agency so that larger clients can recognize that they, too, can get good, creative work.”

Chiat was also enthusiastic about reaching across the Pacific to grow. “The Pacific Rim is an incredible marketplace,” he said. “We have a lot of Japanese business, and we expect to get more.” Indeed, Chiat/Day would suddenly have a major foothold in the area, including Mojo offices in Hong Kong, Singapore, New Zealand, Sydney and Melbourne.

In recent years, Chiat/Day has drawn attention for some of its offbeat ads that featured engineers discussing Nissan engineering and its more recent “UBU” campaign for Reebok that features an assortment of characters wearing the trendy athletic shoes.

Once a boutique agency better known for its quirkiness than its size, Chiat/Day has become one of the nation’s fastest growing ad firms. The traditional rap against such rapid growth has been that agencies lose some of their creative zeal in the process. But Chiat rejects that notion. “Bigness,” he said, “can be goodness if you do good work.”

Industry executives speculate that Chiat/Day probably has more than good work in mind. Some say the agency is likely making the move in a bid to land a large piece of Australian advertising business that it cannot get without a strong presence in Australia. “I’ve got to believe that there’s a big account out there,” said Bob Hoffman, a San Francisco ad consultant who recently resigned as chairman of Mojo USA’s San Francisco office.

One large account that could conceivably interest Chiat/Day is Nissan’s estimated $26-million Australian advertising business, now handled by another Australian ad agency. While executives from Chiat/Day and Mojo would not speculate on specific accounts they might pursue, Chiat clearly has rapid growth in mind.

Meanwhile, executives at Mojo say they are happy with the preliminary agreement. “There is great creative compatibility between the two agencies,” said Malcolm Spry, chairman of Mojo MDA Group, reached at his office in Sydney late Monday. “I don’t think a bidding war is likely, given that management is supportive of the bid. Of course, the shareholders have to ultimately decide.”

“No firm offer has come from Chiat/Day, but we’ve had a number of discussions, and we expect to receive their offer within the next 10 days,” said Spry, whose company is the only publicly held ad agency in Australia. If the deal goes through, he added, “both agencies will be much more strongly aligned internationally.”

Possible Headaches

Under the preliminary agreement, Chiat/Day would then sell a minority stake in the Australian agency to the New York advertising firm HDM and Spry would become co-chairman of a new firm: HDM Mattingly. That new agency would purchase two of Mojo’s divisions from Chiat/Day, the Mattingly Agency and Marketing Communications Holdings.

Chiat/Day is offering $2.20 a share for Mojo’s 35 million shares, according to Monday’s announcement.

Industry executives say some of Chiat/Day’s biggest headaches related to the acquisition won’t be in Australia, but in the United States. For one thing, Mojo now handles the estimated $10-million ad business for the Toyota Dealers of Northern California. That, industry observers said, clearly is in conflict with Chiat/Day’s Nissan business.

Also, Chiat/Day said it plans to merge its New York and San Francisco offices with those of Mojo. “That kind of thing can always be a problem,” said one West Coast ad executive.

But Hoffman, the former chairman of Mojo’s San Francisco office, said he thinks the merger could work. “They are both very creative agencies,” Hoffman said. “It won’t be a terribly difficult marriage to work out.”

And then there’s the proposed name Chiat/Day/Mojo. “Mojo even suggested at first that we name the new agency Chiat/G’Day,” joked Chiat in a statement announcing the agreement. “But reason prevailed.”

CHIAT/DAY’S CLIENTS (Client lists, provided by Chiat/Day, may include only part of a client’s advertising. For instance, Chiat/Day handles the Gaines dog food account for Quaker Oats.)

Nissan

Reebok

Mitsubishi

Quaker Oats

Kitchens of Sara Lee

Home Savings

NYNEX Yellow Pages

Dell Computer

Ricoh

Arrow Shirts

National Car Rental

Intel