Profitable but shaky, Havas hunts for deals

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with two of its largest accounts up for grabs, Havas CEO Alain de Pouzilhac is pursuing potential deals for the holding company's MPG unit and fending off growing market sentiment that Havas is in play.

Following news of reviews at German automaker Volkswagen AG and chip maker Intel Corp., industry executives said Mr. de Pouzilhac has approached Omnicom Group and Interpublic Group of Cos. about joint media ventures; neither holding company would comment.

Through a spokeswoman Mr. de Pouzilhac maintained that Havas can survive as an independent company. Havas just returned to profitability in the first half, following a year-long restructuring.

But the potential account losses are giving critics fodder to draw parallels between the Paris-based holding company and now defunct Cordiant Communications. Cordiant, crippled in 2002 by the departure of major clients Hyundai Motor America and Wendy's International, was dealt a final blow when Allied Domecq pulled its business in April 2003. Two months later, Cordiant was sold to WPP Group.

"Given the lack of organic growth in the market, the worst thing that can happen is the loss of large clients," said Michael Nathanson, global media analyst at Sanford Bernstein. They provide big margins and consume a lot of overhead and staff that the agency has to cut if they leave, he said.

big accounts

Volkswagen, which on Sept. 30 said it is evaluating its $800 million global media services account-currently split between Havas' MPG and Grey Global Group's MediaCom-confirmed that the U.S. portion of the account is in review (See Late News, P. 1).

Five days later, Intel threw its $300 million-plus account into play. Euro RSCG Worldwide, Havas' largest agency network, has handled Intel in various regions since 1990 and globally since 1996; MPG is Intel's global media agency. Intel, one of Havas' top five clients, represents less than 5% of Havas' total global revenue, according to an agency spokesman.

The greatest variable could be the intentions of French financier Vincent Bollore, who began buying shares in Havas this summer and now holds a 16% stake in the company. Although he has been known to trade out of his holdings in the past, Mr. Bollore has indicated interest in buying a communications business, said executives familiar with his activities.

Mr. Bollore, who has been offered two seats on Havas' board, has requested the creation of an advisory board that will oversee Havas' current directors and management. That proposal will be considered by Havas' board in early December, said an executive familiar with the matter. Mr. Bollore, who did not return calls for comment, has obvious options for his stake in Havas-buy, hold or sell.

Potential buyers include Maurice Levy, chairman-CEO of Publicis Groupe, who downplayed the possibility of a deal. "I'm not dreaming of a merger between Publicis and Havas. If a `For Sale' sign went up, I'd have a duty, as CEO, to look at it. But our interest is very low," he said.

Even if his interest were to increase, however, its unclear whether French authorities would view such a merger favorably out of anti-trust concerns. Analyst Pierre Bucaille at Paris-based Fideuram Wargny believes that French authorities would be more willing to let Publicis buy Havas than to see the group fall to a foreign bidder.

Few think Omnicom would make a play, given its historic approach of eschewing large network purchases for strategic agency buys. Interpublic Group is an unlikely candidate, because its management is focused on reinvigorating its current holdings. WPP, which last month beat out Havas to buy Grey Global Group, also declined to comment.

contributing: alexandra jardine, dagmar mussey, laurel wentz

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