GREY GLOBAL CONFIRMS BANKERS HIRE; WON'T SELL PIECEMEAL

But Intact Sales Strategy Limits Number of Prospective Buyers

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NEW YORK (AdAge.com) -- Grey Global Group this morning confirmed it had hired Goldman Sachs & Co. and J.P. Morgan Chase & Co. to assist it “in exploring alternatives focused
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on enhancing shareholder value.” The disclosure came nearly a month after the first reports on AdAge.com and elsewhere that Grey had hired the two investment bankers. It marked Grey’s first comment on the issue.

To sell intact
Grey said “it does not intend to pursue a sale of individual business units,” signaling it doesn’t plan to break up the holding company. In a short press release, Grey said “there is no assurance that this exploration will result in any specific transaction, or as to what the terms or form of any such transaction may be.”

The company said “it does not expect to disclose developments with respect to its exploration of alternatives unless required.”

Last independent
Madison Avenue’s last remaining major independent ad firm made its announcement before the stock market opened today. The market initially reacted negatively, sending shares to $820 in pre-market trading, down from a July 19 close of $878.

The stock then opened this morning at $850 a share -- as it happens, precisely the price where Grey stood before the first online reports late June 25 that it had hired investment bankers. Within minutes of opening trading today, the stock had recovered to $875. Grey tends to have sharp fluctuations because it is thinly traded.

Narrow field of prospects
Grey’s confirmation provides some clarity to investors. But the disclosure that it won’t sell individual units could reduce the already narrow field of prospective buyers.

No. 4 ad firm Publicis, which had been seen as a favorite to buy Grey, dropped out as a bidder for the whole company last week, though it left open the possibility of buying individual units. Grey’s announcement today reduces the chances that individual divisions, such as MediaCom or Grey Healthcare Group, will go on the block. But such sales still might happen: A company could buy Grey and spin off assets that didn’t fit with the new owner’s plan.

Most likely bidder
No. 2 WPP Group remains the most likely bidder for Grey, and private-equity firms also are candidates. Advertising Age reported July 19 that one prominent private-equity firm, Hellman & Friedman, has shown interest. Havas, the No. 6 holding company, is a long-shot candidate to buy Grey; sources told Ad Age last week that Havas has been pursuing various private-equity firms, including Hellman & Friedman, about a joint bid.

Grey’s fate is largely up to the desires of its 77-year-old chairman-CEO, Ed Meyer, who owns more than 20% of the company and controls 70% of voting stock.

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