Several suitors waged a battle for True North

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It seemed to come out of nowhere: Interpublic Group of Cos., which had been barely a blip on the radar during months of speculation, edged out Havas Advertising in March to walk away with True North Communications.

But as recent documents show, the deal-worth a hefty $2.34 billion-ended three years of maneuvering among five different suitors and a buyout firm in a rapidly consolidating market. With few companies left on the block, nearly all the top public holding companies knocked on True North's door. A True North executive said the narrative shows the lengths the company went to in order to find the right partner, countering complaints among Wall Street insiders that the company had sold cheap.

Papers filed with the Securities and Exchange Commission this month detail a byzantine series of discussions over a three-year period starting almost as soon as True North completed its merger with Bozell Jacobs Kenyon & Eckhardt-the parent of Bozell Worldwide and Temerlin McClain-in December 1997. The filing chronicles talks starting in 1998 between True North and five other suitors-Interpublic and four other publicly held agencies identified only as Companies A through D-as well as attempts to stage a management buyout.

Based on interviews with those close to the discussions, Advertising Age has identified the companies as follows: Company A, Omnicom Group; Company B, Cordiant Communications Group; Company C, Havas Advertising; and Company D, WPP Group. With that list, it's clear how the drama unfolded.

According to the document, shortly after completing the BJK&E deal, True North's management realized the company still needed more size and international reach, and began reviewing its options. In November 1998, management was approached by John Wren, CEO of Omnicom, but the True North board nixed merger talks. At some point in late 1998 and early 1999, True North also held talks with Cordiant, but those discussions did not advance.

In March 1999, Mr. Wren reached out to True North again, and was again turned down by the board, while Cordiant came back to the table in late summer. At the same time, True North management began discussions with an unidentified large private equity firm about taking the agency private in a management buyout.

In August, True North began talks with Havas Advertising, and both sides entered into a confidentiality agreement Aug. 26. Merger talks with both Havas and Cordiant continued into the fall, as well as discussions with the private equity firm. But True North management shelved the management buyout plan in September, worried about the debt load and growth targets needed to make it work. It was in September that True North decided to merge the international operations of Bozell into FCB.

The merger front remained quiet until Feb. 2000, when WPP Group reached out to True North. The two sides signed a confidentiality agreement on Feb. 18, 2000, and WPP Chief Executive Martin Sorrell met with True North Chairman David Bell and both companies' management in Feb. 21.

NO STANDSTILL

At the meeting, True North-mindful of WPP's hostile takeovers of J. Walter Thompson Co. and Ogilvy & Mather, as well as Publicis Groupe's hostile bid for True North in 1997-asked WPP to enter into a standstill agreement where it could not buy shares in True North while the negotiations continued. WPP's management demanded a condition of its own: that True North negotiate exclusively. Neither side would agree to the standstill. True North signed Morgan Stanley & Co. as its adviser and continued discussions with Havas and other companies into the summer.

In August, WPP made an offer to buy True North in a stock swap worth about $40 a share. On Sept. 1, the True North board ruled the offer too low and Kevin Smith, True North's chief financial officer, wrote to WPP on Sept. 5, turning down the offer. The next day, DaimlerChrysler called for a two-way review to consolidate its $2.4 billion account between True North and Omnicom.

Faced with the loss of its biggest client, True North received a counteroffer from WPP where it sweetened the deal by adding a phantom stock that would gain value only if WPP's stock did not rise to certain heights after the merger closed. At a board meeting Sept. 13, True North's advisers at Morgan Stanley noted if the Chrysler account went to Omnicom, it would eliminate a barrier to some of the other merger options on the table. True North's board agreed to continue negotiating with WPP, but at a meeting the next day talks with WPP were called off again.

On Nov. 3, Chrysler announced it would consolidate at Omnicom. True North then redoubled meetings with suitors. Cordiant returned to the table Nov. 7 and on Nov. 21 presented a draft merger pact, and Interpublic arrived on the scene Dec. 9. Talks continued in December with Interpublic and Cordiant, and True North's board expected to announce a merger with Cordiant on Jan. 15.

But the talks with Cordiant ran out of steam in late December and on Dec. 21, Havas made an offer worth $40 to $45 per share and asked for exclusive negotiations. Re-enter Omnicom, which had held talks with True North's management as far back as 1998. Mr. Bell, Mr. Wren and other senior officers met again Jan. 3, while Interpublic's brass met with True North's on Jan. 7 and 8. Havas continued its due diligence process at the same time.

FAST-PACED NEGOTIATIONS

By February, True North's merger discussions with Havas and Cordiant developed into three-way talks regarding possible multi-agency transactions. Those talks went nowhere, but Feb. 28, Omnicom presented a draft letter with a proposal for a stock swap merger worth $41.50 per True North share.

At a board meeting March 14, True North's financial advisers recommended Interpublic's bid based on the synergies between both, the manageable client conflicts and the price of the deal. Negotiations continued at a fast pace for the next three days and on March 16, Interpublic informed True North its board had approved a merger proposal.

With word of the talks leaking around Wall Street, talks went into overdrive. At a special board meeting March 18, True North was faced with offers from Omnicom, Havas and Interpublic worth $39.17, $39.57 and $40.24 a share, respectively. The board voted unanimously for Interpublic, and the deal was announced the next morning.

Contributing: Laura Q. Hughes

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