Up for sale? Bell Pottinger fights for survival after South Africa scandal

LONDON (Reuters) - Britain’s Bell Pottinger has put itself up for sale after it lost clients for running a racially charged campaign in South Africa, potentially bringing down the curtain on one of the world’s leading public relations agencies.

After working behind the scenes on events ranging from the election of Margaret Thatcher to the death of Russian spy Alexander Litvinenko, Bell Pottinger has been brought down by a scandal of its own making.

On Tuesday, it was thrown out of a British industry body for running a campaign in support of South African President Jacob Zuma. That campaign was deemed to have deliberately inflamed racial tensions, prompting clients to ditch the firm, among them HSBC, Europe’s biggest bank.

Its second-biggest shareholder, Chime, has written off its 25 percent stake and its chief executive and biggest investor have quit. It is now fighting to retain clients and key staff.

“I can confirm that we have appointed BDO to look at all options for the business including a possible sale,” a spokesman for Bell Pottinger said in an e-mail. It made no further comment.

Bell Pottinger was founded in 1987, after co-founder Tim Bell made his name by helping to get Thatcher elected as Britain’s first female prime minister.

It says it works to protect its clients’ reputations, “whatever the size of the challenge”. Past clients have included Kremlin critic Boris Berezovsky, the wife of Syrian President Bashar al-Assad and a foundation for the memory of former Chilean dictator Augusto Pinochet.

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In South Africa, it worked with the president’s son and the influential Gupta family on a political campaign that South Africa’s main opposition party, the Democratic Alliance, described as a bid to “divide and conquer” the public.

According to an email published in South African media, Bell Pottinger said the campaign needed to stress the continued “existence of economic apartheid”.

The communications preceded a sustained campaign condemning enemies of Zuma, including pro-business elements of Zuma’s own ruling African National Congress, as agents of “white monopoly capital”.

The slogan, aired frequently on a Gupta-owned television station, quickly gained traction in a country where the white minority still wields disproportionate economic clout two decades after the end of apartheid.

Bell Pottinger was paid 100,000 pounds ($129,000) a month by Oakbay, the holding company of the Guptas, which has been accused of using its closeness to Zuma to win government contracts. Zuma and the Guptas deny any wrongdoing.

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Britain’s Public Relations and Communications Association expelled Bell Pottinger for a minimum of five years, an unprecedented step for such a prominent member.

Bell Pottinger has apologized for the campaign and described it as “inappropriate and insensitive”, but it did dispute the basis on which the (PRCA) ruling was made.

Co-founder Bell told Reuters the agency is now “close to the end”. He visited South Africa to meet the Guptas ahead of the contract, but has since distanced himself from the South Africa scandal.

“It was inevitable, and I’m not surprised,” he said of the PRCA expulsion. “I think it’s very sad that something that I ran for years and years has been destroyed in less than a year,” he told Reuters by telephone.

Other clients such as South African investment bank Investec, mining company Acacia, luxury goods firm Richemont, UK construction company Carillion and UK bank CYBG have also stopped working with Bell Pottinger recently.

A former chief executive of a large London corporate PR firm said agencies were generally valued as a multiple of their income fee, but that it would be difficult to value a company struggling to retain clients.

“The one thing that Bell Pottinger still has is some really good people, and if they’re going to have any hope of holding it together, either to fix it or sell it in part or in chunks, they’ve got to try and keep the people onside,” the former CEO said, adding that rivals would be circling.

Editing by Guy Faulconbridge, Larry King