Havas seen as likely suitor to buy True North

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Ad industry buzz has True North Communications all but sold to French giant Havas Advertising. But not everyone believes a deal is imminent - other holding company buyers could still strike. What's more, questions remain whether a Havas-True North deal makes strategic sense.

True North - which owns FCB Worldwide, Bozell Group and Pervasive Media (formerly TN Media) - has been a takeover target since FCB lost $1.5 billion in DaimlerChrysler billings in November, representing 9% or $140 million of its revenue. Without a car account conflict, a takeover is easier.

Interpublic Group of Cos., Publicis Groupe and others are rumored suitors, but Havas is believed closest to a deal.

Right now, 45% of Havas' revenue is from the U.S. With this deal, the balance would shift to more than half. Havas owns Euro RSCG Worldwide and last year acquired Arnold Worldwide Partners, Boston, for $2.1 billion.

But there's a question of how TN would fit with Havas. Alain de Pouzilhac, chairman of Havas, has set a strategy to focus on marketing services, which make up 60% of group revenues. One institutional investor said, "Mr. de Pouzilhac has said many times the logic of having two networks is stupid. It's a question of management credibility."

If Havas does buy True North, it would signal a major strategy change. Merrill Lynch & Co. analyst Lauren Rich Fine believes the price wouldn't be much above its current $2 billion market value. As True North rebuilds, the agency has "no immediate pressure to sell," she noted.

Analysts from Credit Suisse First Boston in a report last week pegged the odds of Havas buying True North as 1 in 3. "[I]n our meeting with Havas management [on Jan. 29], we came away with the impression that the probability of Havas buying TNO is lower than we previously anticipated," the report states.

Havas could purchase True North for its U.S. media strength and sell off some of the advertising companies. "As long as Havas is adding non-traditional areas, this makes sense," said Karen Ficker, an analyst at ING Barings.

Media Planning Group, which Havas fully acquired last month when it bought out the remaining 45%, would likely be merged with Pervasive Media rather than keeping two separate media agency brands since neither is global, predicted another agency holding company executive.

On the agency side, a deal would give Havas two very different agency brands. Euro RSCG, especially strong in Europe, offers more hip and unconventional creative exemplified by eyepopping Evian ads in France. FCB, the fourth-largest U.S. agency, tends toward more conservative work such as AT&T Corp. consumer long-distance ads with comedian Paul Reiser.

True North's stock has hovered around $40 a share for the last few weeks; some analysts expect that if sold, it will be at a premium of around 25%, or $50 a share. However, there are also predictions as low as $45.

Another possible wrinkle could come from French company, Publicis Groupe, which still owns 10% of True North.

Publicis and True North had a joint venture that disintegrated, and in 1997 Publicis attempted a hostile takeover. Speculation is Publicis, True North's largest shareholder, still wants to purchase the company. None of the holding companies or agencies involved would confirm the talks.

Contributing: Mercedes M. Cardona, Hillary Chura, Laura Q. Hughes, Kate MacArthur, Laurel Wentz

Copyright February 2001, Crain Communications Inc.

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