Delaware court derails Publicis bid for True North

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A Delaware Court of Chancery judge Dec. 23 delivered what could be the death blow to Publicis Communications' hopes of launching an 11th hour tender offer for control of True North Communications.

Chancellor William Chandler III ruled that Publicis, in launching the tender offer, violated a contract it had signed with True North. He issued a preliminary injunction barring Publicis from going ahead. The decision could be appealed to the Delaware Supreme Court. However, True North, following the decision, said it would go ahead with a Dec. 30 meeting to seek shareholder approval of its plan to acquire Bozell, Jacobs, Kenyon & Eckhardt, New York.

``We are proceeding and planning on the shareholder vote on Tuesday,'' said Mitch Engel, president of the associated communication companies unit of Chicago-based True North. He said Publicis is ``blocked from getting in and playing.''

Mr. Engel added: ``Publicis has made some noise they'll appeal to the Supreme Court in Delaware, but nothing is official yet.''

A spokeswoman for Kekst & Co., Publicis' public relations agency, would only say, ``We are reviewing our options,'' and would not comment further about a possible appeal. Publicis Chairman Maurice Levy, who is spearheading his company's bid to acquire True North, could not be reached for comment.

The Delaware judge said the contract Publicis signed earlier this year, dissolving its failed joint venture with True North, required the Paris-based agency network to support True North's purchases of ad agencies though Publicis could vote its own shares against such deals. Publicis owns 18.5% of True North's common stock.

Quoting language in the agreement that said Publicis must take action ``in support of the transaction,'' the judge said he could see no reason why Publicis could mount a tender offer.

``Without listing every action that [support] might require a party to affirmatively undertake, it is a term ordinarily understood in the English language as incompatible with the launching of a hostile tender offer conditioned on abandonment or destruction of the very transaction that Publicis is obligated to assist,'' the judge said.

``Publicis is contractually bound to support True North's acquisitions, not undermine them by launching a hostile tender offer,'' the judge said.

Publicis has contended its plan to acquire control of True North is a better deal for True North shareholders.

While the Delaware court action appears to halt the tender offer, a U.S. District Court judge in Chicago was expected to rule Dec. 24 on other aspects of the dispute. It was unclear how the Delaware decision might affect the federal court ruling.

Regarding the expected ruling in Chicago, Mr. Engel said those issues are more ``procedural'' and ``technical''--such as proxy information and data for shareholders--and he doesn't expect that decision to have any large-scale effect on the Dec. 30 shareholder meeting.

Copyright December 1997, Crain Communications Inc.

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