IPG activist agitates for company sale

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An activist shareholder wants Interpublic Group of Cos. to put itself up for sale. Interpublic doesn't want its other shareholders to know.

Last week, the holding company asked the Securities and Exchange Commission to let it deep-six a gadfly's proposal to add to its annual meeting agenda a referendum to sell the troubled company-therefore depriving its other shareholders of a vote.

The issue came to light in a July 19 letter from an Interpublic attorney to the SEC requesting that regulators concur with its desire to keep the proposal off the proxy for its 2005 annual meeting. In that letter, Interpublic revealed that shareholder Charles Miller last September submitted the proposal for the meeting.

Interpublic has delayed its annual meeting until it files 2004 financial statements, which it's held back while it works through accounting problems. Interpublic intends to file the statements by Sept. 30 and mail proxies around Oct. 7.

Interpublic stock plunged three years ago when accounting and operating problems became apparent, and it's floundered since then as the No. 3 ad holding company has struggled with restatements, weak operating performance, management turnover and an SEC probe.

Dr. Miller, a Great Neck, N.Y., psychologist, has for years taken on a range of companies from Bausch & Lomb to RJR Nabisco on issues from executive pay to election rules for directors. He has been an Interpublic shareholder since at least 2001 and owned 600 shares as of September. The stock has fallen 57% since year-end '01.

Dr. Miller submitted a "Maximum Value Resolution" to Interpublic in which shareholders could vote on his proposal urging the board "to arrange for the prompt sale" of Interpublic "to the highest bidder."


The purpose, according to the proposal, is to "send a message" to the board supporting a sale. "I believe that a strong and or majority vote by the shareholders would indicate to the board the displeasure felt by the shareholders of the shareholder returns over many years and the drastic action that should be taken," Dr. Miller said in the proposal. The proposal would not be binding, but Dr. Miller said that "if this resolution receives substantial support from the shareholders, the board may choose to carry out the request set forth in the resolution."

If the resolution passes, Dr. Miller said in the proposal that he believes "the management and the board will interpret such adoption as a message ... that it is no longer acceptable for the board to continue with its current management plan and strategies."

An Interpublic spokesperson said: "Management is committed to maximizing shareholder value. The best way to do this is to improve operating performance, not sell when the stock is near historic lows." Dr. Miller at press time had not returned a call seeking comment.

As Interpublic labors on a turnaround, industry executives have speculated on whether Interpublic could be bought or broken up. There's no evidence of any real deal. In the SEC letter, Interpublic's attorney said the company "has not received inquiries" about any transaction, "notwithstanding the fact that the company has little in the way of formal anti-takeover defenses." Interpublic stock, even at its current depressed level, still carries a hefty price tag with an enterprise value (stock and debt) of $6.6 billion.

In its letter to the SEC, Interpublic asked regulators to concur with the company's view that the proposal can be kept off the proxy statement for the annual meeting. Interpublic's attorney wrote that the proposal "deals with a matter relating to the ordinary business operations of the company" and that it is "contrary to the commission's proxy rules."

Nell Minow, editor of The Corporate Library, a corporate-governance research firm, said the proposal deserves a vote. "This is absolutely a legitimate subject to be addressed in a shareholder proposal," she said. "Essentially what it is is a vote of no-confidence in management. What other way is there to communicate?"

The SEC's position on Interpublic's request isn't known.

Ms. Minow criticized Interpublic's effort to disallow the proposition, saying management should put it on the proxy and then provide a clear explanation why Interpublic shareholders are better off staying the course. "If management isn't comfortable explaining why it is going to do a better job than someone else, then they shouldn't be in the job," she said.

Interpublic might feel that the point is to set aside the proposal given other pressing priorities, such as completing its annual report. But putting the proposal up for vote wouldn't necessarily consume a lot of management time. Other companies put Dr. Miller's sell-the-company proposal up for vote while coping with tough issues; Rite-Aid Corp. did so in 2000 while facing criminal investigations over its accounting.

Dr. Miller put his up-for-sale proposal on the proxies of at least six firms-P.H. Glatfelter Co., Lawson Products, Occidental Petroleum Corp., Rite Aid, A. Schulman Inc., Whirlpool Corp.-from 1997 to 2000. All proposals failed but shareholders had the opportunity to vote.

Dr. Miller has at times succeeded on shareholder proposals. His proposal to bar golden parachutes passed at Angelica Corp. In May, Baxter International shareholders approved his proposal to elect board members annually.

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