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True North Communications is scrambling to line up support from shareholders for its acquisition of Bozell, Jacobs, Kenyon & Eckhardt, even as Publicis SA refuses to wave a white flag in its hostile battle for control of True North.

True North's management appears to have sufficient support from outside shareholders but is still hustling to win support of internal shareholders, some of whom are said to be unhappy with the BJK&E deal, believing it won't address True North's need to build a strong second global network or add value to their shares.


Several high-ranking True North executives are believed to be balking at the prospect of reporting to BJK&E President-CEO Chuck Peebler, who will be president of the merged company.

True North's management and employees together own a stake equivalent to Publicis' 18.4%. True North needs to win support from a majority of shareholders to close the BJK&E deal.

"What's going to push this thing over is fear of the status quo," said one executive shareholder who is voting for the deal and expects others to as well.

Another shareholder said he would put aside his misgivings about some of the deal's financial provisions and vote for it.

True North management held staff meetings in various True North offices last week to reassure employees. At a meeting in Chicago Dec. 8, Chairman-CEO Bruce Mason said there would be some layoffs associated with the deal, but did not say how many jobs would be cut. Some estimate as many as 300 jobs could be lost.

True North and Publicis are due back in court in Chicago Dec. 18 to argue the French company's request to stop True North's Dec. 30 shareholder vote on the BJK&E acquisition. Last week, Publicis withdrew a competing offer after a U.S. District Court judge issued a temporary restraining order barring it from making a play for a majority of True North and from lobbying against the BJK&E deal.


Publicis had made a $28-per-share offer for a majority of True North, on the condition the BJK&E deal be stopped, and urging that True North's board consider other offers for the company.

Judge Joan Gottschall, of the U.S. District Court in Chicago, issued the restraining order Dec. 9, barring Publicis from continuing its offer, contacting shareholders or encouraging a third-party takeover offer.

Publicis filed a motion seeking an emergency appeal and a stay of the restraining order. At press time, the 7th U.S. Circuit Court of Appeals in Chicago had not ruled on those motions.

Publicis Chairman Maurice Levy would not comment on his future plans, citing the judge's order, but industry observers in France had speculated he may sell his True North stock in the public market after the BJK&E deal closes. Mr. Levy may take advantage of upswings in the stock thanks to investor optimism and sell off his holdings, which would be diluted to less than 10% by the new stock issued to cover the approximately $440 million price tag for BJK&E.


Publicis has been casting about for acquisitions worldwide to strengthen its network. The company has nearly $100 million in cash on hand for acquisitions and has had credit lines ready for any opportunity since last year.

Even if Publicis could manage to get the injunction lifted, True North management may already have the votes it needs to prevail. True North executives have been contacting analysts and portfolio managers and they appear supportive of the BJK&E deal, hoping it will boost the stock's value.

According to the CDA/Spectrum Institutional Stockholders Survey, three money-management companies hold 23% of the nearly 25 million outstanding True North shares. The largest block is held by GeoCapital Corp., a New York company that controls 2.3 million True North shares -- more than 9% of the company -- and that has supported True North management in the past.


"I would assume this deal would go through," said Lance James, portfolio manager at mutual fund manager David L. Babson Co., Boston. Mr. James, who controls 1.6 million shares -- almost 7% of True North -- in his portfolios, said Babson's shares are likely going to support the BJK&E deal.

True North is undervalued at the moment, with its stock price trading at 15 to 16 times its projected 1998 earnings per share, while Interpublic Group of Cos. trades at 21 times earnings and Omnicom Group at 23 times its estimated 1998 earnings.M

Contributing: Judann Pollack, Bruce Crumley, Laurel Wentz, Bradley Johnson, Jack

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