Publicis restructures shareholdings to cut True North link

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PARIS -- The story of the failed partnership between Publicis and True North Communications took another turn November 6 when Publicis Chairman Maurice Levy announced a shareholding reorganization at Publicis designed to facilitate an end to the crossshareholding still linking the two transAtlantic agency holding companies. Publicis attempted a hostile takeover of True North last year but failed.

Separately, Havas Advertising officially denied on November 6 that it's in acquisition talks with True North. Takeover rumors surfaced earlier this week when True North adopted a new poison pill defense to replace an earlier one that is expiring.

Mr. Levy's move will streamline Publicis' structure, and in so doing transform True North's estimated $145 million holding into tradeable shares by the end of this year, as stipulated in a May, 1997, divorce agreement between the two groups.

Currently, True North owns 26.3% of Publicis Communications, an untraded unit regrouping Publicis' European advertising businesses. Publicis Communications, in turn, owns 10.6% of publicly traded True North.

Earlier agreements had prohibited True North from selling its stake in Publicis Communications without Publicis' approval, while Publicis was free do to with its publicly quoted True North stock as it wished.

Given the considerable ill will and distrust produced during their business partnership, both groups have preferred to maintain their hostile cross-shareholdings until some equitable and mutually acceptable plan to sever the ties once and for all was feasible.

Under Mr. Levy's new plan, Publicis Communications will be merged into group holding company, Publicis SA, with each two shares of Publicis Communication being converted into three new shares in Publicis SA.

Once that has been done, True North will own a direct 8.8% stake in Publicis SA that it can trade or sell as it pleases.

Although Publicis remains True North's largest single shareholder, neither group has any significant voting influence in the other's operations. The move to transform True North's investment into a negotiable - and presumably profitable - one is therefore aimed at encouraging an eventual sale of the stock.

"Neither Publicis or True North have any longterm interest in holding shares of the other, and we see this restructuring as a manner of facilitating mutual divestment," says Mr. Levy.

Despite the many account and development successes that made 1998 an excellent year for Publicis, Mr. Levy noted that the lingering link with True North "remained the one big issue we had not managed to resolve."

The plan was approved by a meeting of the Publicis board that Mr. Levy says True North officials failed to attend, as well as Paris stock market authorities. It must still pass a stockholder vote slated for December 11.

But, while Mr. Levy says he's confident of approval there, the bitter history between the two groups makes a spiteful legal challenge from True North a real possibility.

"If True North decides to contest this, that is their problem," says Mr. Levy of the risk. "But we've planned this very carefully, and consulted independent banks, evaluators, and French courts in preparing it. I believe the new structure will be in place as of January 1, 1999."

Copyright November 1998, Crain Communications Inc.

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