Two-horse race: Japan's duo rule out bid in Grey sale

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The potential Japanese suitors, Dentsu and Hakuhodo, are leaving WPP and Publicis to fight a head-to-head battle over Grey.

In the first report on the sale last week in Advertising Age, the British WPP Group and French rival Publicis Groupe were identified as the most likely buyers for Grey Global Group. But it still seemed possible that the Japanese companies, and maybe even New York-based Omnicom, would take a shot at Grey. Not any more.

A spokesman for Dentsu, the world's fifth-largest holding company, had no comment. But executives familiar with how the company operates said since taking a 15% stake in Publicis in 2002, Dentsu has made it clear that it considers the Paris holding company its key Western partner. Another reason a bid would be unattractive, said these executives, is that Dentsu would likely have to bid against Publicis.

Tomokazu Jimbo, corporate executive officer of Hakuhodo DY Holdings, the world's eighth-largest holding company, said, "Grey is a very good company, but Hakuhodo has no interest" in it.

Omnicom unlikely to bid

Omnicom Group, the world's largest holding company and the best-positioned financially to bid, is also unlikely, said people familiar with the company.

"Grey is too big a deal," said one executive. "Omnicom generally does smaller deals that fit well with its top 250 clients." Executives close to the talks note Omnicom did not sign a non-disclosure agreement for the Grey sale, while, as Ad Age has reported, WPP and Publicis have. Omnicom declined to comment.

Observers do not expect Interpublic Group of Cos. or Havas to make a play for Grey, given both are wrestling with their own turnaround efforts. A Havas spokeswoman said the company has no comment; a spokesman for Interpublic also had no comment.

MDC Partners, Toronto, which has in recent months been on a buying spree, is said to be keen to be in on the action. But it is more likely it would buy fringe shops from the company that acquired Grey than try to raise the capital to compete with its larger rivals. A spokeswoman for MDC had no comment.


As revealed by Ad Age, Grey is working with investment bankers Goldman Sachs and J.P. Morgan Chase. It is also working with the law firm of Simpson Thacher & Bartlett.

The possibility of a private-equity firm making a bid for Grey is generating some buzz. Grey has comparatively little debt, making a debt-financed takeover by such a financial buyer more attractive. And a private-equity deal in advertising is not unheard of-nearly a decade ago, in 1996, Hellman & Friedman bought a stake in Young & Rubicam and then helped take the company public.

The speculation over who will make a play for the company is expected to end within the next few weeks. Grey, Publicis and WPP all refused to comment on the status of the deal.

Grey stock closed last week at $990, up $95 for the week.

The clock is ticking on Grey Chairman-CEO Ed Meyer's control. He owns more than 20%, but has 70% of the shareholder vote through so-called Class B shares, which are set to revert to common stock in April 2006. However, Grey could always extend the term of Class B shares if it stayed independent; shareholders did just that in 1995.

Mr. Meyer may have offered one more clue that he was preparing to decamp with his revised contract in May (AA, May 31). A clause in the document allows him to depart with "up to $100,000 worth of furnishings, artwork and the like contained in his office." When the chairman leaves, he gets to keep the chair.

contributing: bradley johnson

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