The question of whether Publicis Chairman-CEO Maurice Levy will make a run at Interpublic, according to executives familiar with the situation, is expected to come up at a regular meeting of Publicis' supervisory board next week in Paris. One scenario likely to be discussed would have Publicis, the fourth-largest holding company, team up with Dentsu, the fifth-largest player and a 15% shareholder in Publicis, to finance a purchase. (Publicis' supervisory board includes Dentsu's two top executives, Chairman Yutaka Narita and President-CEO Tateo Mataki.)
Maurice Levy responds
Mr. Levy, reached by e-mail, dismissed the Interpublic scenario. He wrote, "The speculation regarding [Interpublic] is either coming from the imagination of a lot of creative bankers, or from the kind of people who want to intoxicate the market with false rumors." An Interpublic spokesman said the company declines to comment "on rumor and speculation."
All denials aside, one thing that is certain: Mr. Levy is interested in doing a deal.
He told The Wall Street Journal in October that he's "contemplating several possible strategies in terms of acquisitions." That report immediately set off speculation that he's once again interested in Aegis, the London-based media buyer and research company that Mr. Levy bid for last year, only to retreat after Vincent Bollore, Aegis' largest shareholder, dug in his heels. (Mr. Bollore is also chairman of rival ad company Havas.) Since then, Mr. Levy has publicly reiterated his lack of interest in Aegis.
A merger of Interpublic and Publicis, with Dentsu remaining an independent but large shareholder in the new entity, would likely create a new No. 1 player, a goliath with about $12 billion in annual revenue (based on 2006 figures) and a client list that includes General Motors Corp., Toyota Motor Co., Procter & Gamble Co. and Unilever. Potential conflicts, needless to say, could abound and a combination could force some agency closings, restructurings or selloffs.
Potential chain reaction
Executives familiar with the Dentsu-Publicis talks say they are very preliminary and could ultimately amount to nothing. And a run at Interpublic could set off a chain reaction, effectively putting the holding company in play and loosening all manner of potential buyers on it. Over the past 18 months, everyone from Google to private-equity firms such as Hellman & Friedman have been rumored as potential buyers.
An Interpublic takeover would be the biggest deal ever seen on Madison Avenue, surpassing the $4.7 billion that WPP Group paid for Young & Rubicam in 2000. Interpublic has a market cap of $5.3 billion and enterprise value (market cap plus debt minus cash) of $6.1 billion.
Publicis, which reports its financials in euros, could take advantage of the slumping U.S. dollar. The value of the euro last came close to its highest level since the currency was introduced in 1999. The euro has risen 12% this year, making it cheaper for Publicis to go shopping in the U.S.
Mulled other deals
Publicis has mulled other deals since swallowing Bcom3. It dropped out of the 2004 auction for Grey Global Group, acquired by WPP for $1.75 billion. In September 2005, Publicis disclosed exploratory talks with Aegis Group but a month later opted not to make an offer.
Investment bank Lazard advised Publicis on the Saatchi and Bcom3 deals. Lazard's former chairman, Michel David-Weill, is on Publicis' board. Lazard's current ties to Publicis aren't clear; Mr. David-Weill exited Lazard last year after Bruce Wasserstein took control.
~ ~ ~
Bradley Johnson and Laurel Wentz contributed to this report.