Y&R scenarios swirl as stock swoons

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After months of speculation about a WPP Group acquisition of Young & Rubicam, the top executives of the two companies have held recent talks, said people with knowledge of the discussions.

At the same time, a new potential bidder -- Andersen Consulting -- has surfaced. That increases the likelihood one of the largest independent advertising companies in the world will be put into play with a price tag that could easily exceed $3 billion.

FERVOR MAY HAVE COOLED

"Recent conversations have taken place" between WPP Chief Executive Sir Martin Sorrell and Y&R President-Chief Operating Officer Tom Bell, one executive said. The executive said the talks did not go all that well, and interest may have at least temporarily cooled.

Both WPP and Y&R declined comment. But another executive with knowledge of the situation said Messrs. Sorrell and Bell have not talked recently. That executive speculated the rumors were stoked by Y&R's drooping stock price and a growing desire by management to sell the company.

Based on 1998 gross income of $1.87 billion and a multiple of 1.5 times revenue, Y&R could sell for at least $2.8 billion. If more than one suitor is involved in the bidding, that figure could go substantially higher.

WPP's Sir Martin has made it known in the past he sees Y&R as a strong strategic fit with his collection of advertising assets. WPP is the parent of Ogilvy & Mather Worldwide and J. Walter Thompson Co.

However, WPP may now not be the only one interested in a deal. Several executives said Andersen Consulting has expressed some interest in Y&R. Andersen is a Y&R client and the two have talked about some form of joint venture, which may have sparked Andersen to ponder a possible acquisition, said one executive close to the companies. Andersen executives did not return phone calls by press time.

STOCK SLIDES

Y&R stock hit a high of almost $72 in late December, but has been falling since then. On March 31, the stock closed at $47. One week later, it had dipped to $40 and was near its 52-week low.

Mr. Bell was believed to be one of the few executives within Y&R opposed to a merger. Several other executives and even rank-and-file employees are now said to be in favor of a sale. They believe a WPP deal in particular would put a higher valuation on Y&R and give the company access to vast global resources.

The timing of an offer could be tied to the expiration of Y&R's management voting trust, controlled by a group of five top Y&R executives -- Mr. Bell, Ed Vick, Stephanie Abramson, Michael Dolan and Satish Korde. The trust was set up in 1996 to maintain control over a majority of the voting stock. The trust is set to expire May 15.

As speculation swept through the hallways at Y&R headquarters last week, staffers at the recently rechristened Impiric (formerly Wunderman Cato Johnson) were especially anxious. One executive said a WPP buyout could delay or quash the direct unit's current rebranding plans.

FORD MAKES FOR GOOD FIT

WPP and Y&R are a good fit from a conflict perspective, particularly since they both count Ford Motor Co. as their largest client.

"The key to any combination to those two companies can be summarized in three words: Ford Motor Co.," said Mitch Kurz, an independent consultant and the former chief client officer and vice chairman of Y&R. "If you see Y&R and WPP executives at the Detroit airport together, that would be a telling sign."

Contributing: Richard Linnett

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