Aegis' Napier Tamps Down Continuing Speculation of Havas Merger

Ad Network Chairman Denies Rumors, Says 2009 'Tougher Than We Expected'

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NEW YORK ( -- There's no truth to talks of a merger between French ad network Havas and the U.K.'s Aegis Group, insisted Aegis' chairman, John Napier, on a conference call with analysts today.

Industry watchers have long speculated that the two European agency holding companies would get together, and momentum for a deal appeared to grow at the end of last year with the sudden departure of former Aegis CEO Robert Lerwill, who repeatedly opposed Havas' chairman Vincent Bollore's overtures.

But Mr. Napier today said there are no ongoing discussions with respect to a partnership or merger between the two companies. He referred to Aegis' relationship with Mr. Bollore, the French financier who is the largest shareholder of Aegis Group and chairman of Havas, as healthy and respectful. "I find him a professional and constructive person to deal with," Mr. Napier said.

Mr. Napier's comments were made during an earnings call this morning for London-based Aegis, whose business is concentrated in media buying and market research. The company is the parent of agency networks such as Carat, Isobar and Synovate.

The first six months of 2009 were "tougher than we expected," he said. Indeed, Aegis saw organic revenue decline 10.8% to $1.04 billion vs. the same period in 2008. Of that, revenue for Aegis Media, which houses Carat and Isobar among other networks, was $655.9 million, and $382.4 million came from Synovate.

North American gains
The Europe and Middle East region remains the "bedrock" of Aegis Media's business, and this year the poorest performing markets have been Spain, Portugal and Italy.

North America is seeing some traction under new CEO Nigel Morris, with some positive new-business momentum at Carat U.S., which has been one of the gloomiest areas at the company.

At its Synovate arm, custom market research was hardest hit, as clients deferred custom projects from the first half of the year into the second half, Mr. Napier said. Geographically speaking, Spain was also tough, while Africa delivered strong performance, and Latin America was stable.

"The results and outlook are encouraging," Goldman Sachs analyst Rakesh Patel said in a research note. Aegis' performance in the second quarter was somewhat stronger than in the first, but Mr. Napier was careful to manage expectations, stating that, despite the slight uptick, the company is "not, however, predicting an upturn" in the marketplace.

Additionally, Aegis provided some color around its reduced headcount. Last year, the company announced a cost-reduction program to eliminate 5% of its global work force -- some 800 jobs in 40 countries -- and Mr. Napier today said more staffers left than initially anticipated, about 900.

Aegis has seen a slew of management changes in the past 12 months, besides the sudden departure of Mr. Lerwill. Other top executives, such as David Verklin, Mainardo de Nardis and Sarah Fay, also left. More changes lie ahead as Adrian Chedore, global CEO of Synovate, is set to retire. He will be succeeded by current Chief Operating Officer Robert Philpott, effective Sept. 1.

On the conference call, Mr. Napier noted that the company continues to search for a CEO to replace Mr. Lerwill, and that may not happen by the end of 2009.

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