MPG has just signed a contract to purchase the media department of Jordan McGrath Case & Partners, New York.
Once the integration is complete, the new media company could boast upwards of $12 billion in worldwide billings, placing it in the same league as Goliaths such as WPP Group's MindShare; B Com3 Group's Starcom MediaVest Worldwide; McCann-Erickson Worldwide's Universal McCann; and Omnicom Group's OMD Worldwide. MPG, which purchased SFM Media, New York, in 1998, is the 13th-largest worldwide media specialist, with 1999 billings of $6.2 billion. In the U.S., SFM/MPG is ranked 14th at $1.4 billion.
"The goal is for MPG to be in the top five now that Havas is the No. 4 worldwide group," said Alain de Pouzilhac, chairman-CEO of Havas Advertising, which ranks among the top advertising holding companies in the world. "Media expertise, including strategy and planning, online and offline, are crucial for our evolution."
Contracts are also being drawn up for MPG to purchase the media departments at two other Havas-owned shops: Messner Vetere Berger McNamee Schmetterer/ Euro RSCG, New York, and Tatham Euro RSCG, Chicago.
"We are in the process," said an executive at one of the agencies. "The papers just haven't been inked yet. It's a matter of working through the fine print." MPG also has held discussions with Arnold Worldwide, Boston, according to another executive, but a deal with that agency is not expected in the short term.
Rolling up by March
MPG CEO Fernando Rodes Vilas said he expects the rollup to be completed by March.
The unusual arrangement under which MPG is acquiring Havas agencies' media departments is stipulated in the original contract between MPG and Havas. No actual cash will change hands, but the transactions will affect the companies' financial reporting structures.
"There's a calculation about who gets the revenue," the agency executive close to the deal said.
As part of the strategy to raise MPG's profile, the company-founded by Mr. Rodes' father 22 years ago in Spain-will move its global headquarters to New York, from Barcelona and Madrid.
The moves are all part of a master plan spearheaded by Steve Farella, president of SFM/Media Planning, New York; Esteban Gomez, CEO of SFM/MPG North America; and Mr. Rodes. Also working on the merger is Jerry Dack, exec VP director of integrated services at SFM/MPG in New York. SFM/MPG executives would not comment for this article.
"The United States is our most important project," Mr. Rodes said. "And SFM is the centerpiece to that."
For now, the media departments will remain housed at their current agencies. "Our employees will be working for a different company but they will be staying under one roof here," said an executive at one of the participating agencies.
changing name to MPG
The acquisitions will create a new unbundled agency that eventually will drop the name SFM and simply go by the acronym MPG.
The MPG holding company includes Media Planning, online agency network Media Contacts, with an office in Miami, as well as Arena, a second media specialist brand that operates in Spain, Mexico and France.
After talking to various American advertising groups in a quest for a global partner, MPG sold a 45% stake to Havas Advertising in March 1999. The majority stake remains with Media Planning's founders and Spain's two leading banks, Banco Santander Central Hispano and Banco Bilbao y Viscaya, both early investors and clients.
SFM/MPG has been quietly informing clients of the consolidation. Potential conflicts exist between three automakers: Volvo North America, Europe and Australia is handled by Messner; American Isuzu Motors is an SFM client, with Volkswagen North America an Arnold account. MPG also handles some Peugeot and Toyota Motor Co. business outside the U.S.
deals are voluntary
The agreement does not force Havas agencies to sell their media departments, nor does it force MPG to buy them, according to the executive at one of the participating agencies.
"It's obviously about what makes the most sense," he said. "We're all part of the same company. And the world is moving toward these big media agencies that consolidate everything. That's why we are phasing it in. It's being done in a classy way in terms of working out the transition for each agency."
Contributing: Hillary Chura