It's put-up-or-shut-up time for activist investor Elliott Management at Interpublic Group of Cos., at least if it wants to advance its own candidates for the IPG board of directors this year: IPG shareholders who oppose the incumbent board are allowed to propose their own nominations starting Wednesday.
The hedge fund last summer disclosed that it had taken the equivalent of a 6.7% stake in the agency services holding company, saying it sought "constructive dialogue" with IPG's board on "steps to maximize shareholder value." People familiar with Elliott expected the firm to push for an IPG sale.
But there turned out to be few obvious buyers and less merger mania than predicted when Publicis and Omnicom were still planning to combine. Since making its move last summer, Elliott has remained relatively quiet.
Talks between the parties are ongoing, according to people familiar with the matter. But if IPG and Elliott don't agree to terms, which would likely mean change on the IPG board of directors, Elliott will formally nominate its own slate of directors, the people said. The slate has been vetted and comprises C-level executives, they added.
The hedge fund will have one month beginning today.
Under Interpublic bylaws, Elliott, as an IPG shareholder, could offer up its own slate of IPG directors any time from Jan. 21 through Feb. 21. Doing so could set the stage for a fight at IPG's May annual meeting, where shareholders will vote on the company's board.
Spokesmen for IPG and Elliott declined to comment.
For Elliott, wedging its way into IPG through a board election might be simpler if the company were obviously faltering. While the smallest player among the top four agency companies has been cited in recent years as a potential takeover candidate, the holding company has beaten analyst expectations in recent quarters and is expected to continue its upswing when it reports fourth-quarter and full-year earnings next month.
IPG beat analysts' expectations for revenue growth in the third quarter, reporting a year-over-year increase of 8.3%, and said net income grew 88.6% to $92.8 million.
"Elliott does not have much of a leg to stand on," said Brian Wieser, senior analyst at Pivotal Research. "It would be a different story if IPG doesn't produce what will probably be industry-leading organic growth, margin expansion, bottom line growth and stock price expansion. What's the problem again?"
If its conversations with IPG or any board nominations don't pan out, Elliott won't just walk away, according to people familiar with the company. They cited the hedge fund's lengthy involvement in Argentina, saying it has been agitating for its agenda there for years.
Another industry expert agreed that IPG is doing better but said it has also been quieter on the technology investment front than its competitors. That might give Elliott a leg up should it nominate someone who has experience doing deals in the ad tech or digital media space.
The company's stock on Dec. 31 hit $21.16, its highest point since 2002. Interpublic closed Jan. 20 at $19.79.
Interpublic shares traded below $18 in mid-May before market rumors began circulating that someone was buying up shares. The stock closed at $19.85 on July 23, the day before Elliott disclosed it had amassed the equivalent of a 6.7% stake in the world's fourth-largest agency company through shares and options. Elliott as of Sept. 30 owned 19.7 million Interpublic shares.
Contributing: Bradley Johnson