Details of divorce pact doomed Publicis tender offer

By Published on .

In the end, Publicis SA's unsuccessful effort to make a tender offer for True North Communications foundered on a seemingly arcane section of a pact dissolving the two agencies' bad marriage and an admittedly badly written line in a letter from a famed New York mergers and acquisitions attorney.

Delaware Chancery Chancellor William Chandler III on Dec. 23 cited the section and the letter from Martin Lipton, of Wachtell, Lipton, Rosen & Katz, in issuing a temporary injunction. That measure not only barred Publicis Chairman Maurice Levy from going ahead with the $28 per share offer, but stopped him from even speaking up against True North's purchase of Bozell, Jacobs, Kenyon & Eckhardt.


"Publicis contracted away its right to launch a hostile takeover of True North and also to solicit proxies in opposition to the Bozell merger," the judge wrote. "Publicis is contractually bound to support True North's acquisitions."

Judge Chandler agreed with True North that the agencies divorce agreement anticipated both going their own way and expanding through acquisitions. A key section of the agreement required Publicis to provide the "pooling" financial information on itself necessary for True North to buy additional agencies and, "if reasonably requested, take such other actions in support of the transaction (other than a commitment to vote for such transaction) as would be customary with respect to an acquisition."

The judge's opinion was upheld on the eve of True North's Dec. 30 stockholder meeting by a three-judge panel of the Delaware Supreme Court.

That court said: "True North bargained for and received a contractual commitment from Publicis to support acquisitions with the limited exception that Publicis is entitled to vote its True North shares as it sees fit."

Mr. Levy, appearing in the Delaware Chancery Court, where preliminary injunction hearings rarely include testimony, suggested the section was an attempt to assure that Publicis provided the accounting data True North would need to use a certain accounting method, given his own previous recalcitrance at providing similar information.

"I am known as being difficult to True North," Mr. Levy testified. They asked for the section "because I am a difficult man and they know that," he said several times. "It was meant to be a pooling letter; that is what I have sweared."


True North, however, said Publicis agreed to "support" acquisitions and pointed to a Jan. 31 letter from Mr. Lipton as indicating a broader meaning.

"Publicis and True North will cooperate in good faith in proposed acquisitions by the other to build their respective global networks," said the letter.

Mr. Lipton in a written declaration called the sentence "vague" and also argued the pooling section of the divorce settlement dealt with accounting issues and didn't cede Publicis' rights.

"The word `support' is not a vague term," said Judge Chandler. "Without listing every action that it might require . . . it is a term ordinarily understood in the English language as incompatible with the launching of a hostile tender offer."

Simultaneously to all of that, in U.S. District Court in Chicago, Publicis attorneys also failed to convince Judge Joan Gotschall to delay or block the stockholder meeting.


Racing against the Dec. 30 deadline in a pre-holiday week, the court held back-to-back hearings beginning Dec. 18, culminating in a tense session with True North CEO Bruce Mason that lasted until 10 p.m. on Dec. 23.

In a Christmas Eve ruling, Judge Gotschall dismissed Publicis' argument that True North didn't seriously consider Publicis' offer as is the fiduciary duty of True North's directors.

Contributing: Judann Pollack.

Copyright January 1998, Crain Communications Inc.

Most Popular
In this article: