IPG Puts NFO WorldGroup on the Block

Hires Goldman Sachs to 'Explore Strategic Alternatives'

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NEW YORK (AdAge.com) -- Interpublic Group of Cos. late Wednesday said it hired Goldman Sachs "to explore strategic alternatives" for NFO WorldGroup. The most likely strategic alternative for NFO is a sale, which would help Interpublic reduce debt.

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Interpublic, under the watch of retired Chairman-CEO Philip H. Geier Jr., bought NFO in April 2000 near the peak of the stock market, paying $493 million in stock and taking on $180 million in debt. NFO was Interpublic's biggest deal in 2000, a year in which expansion-minded Interpublic bought 96 companies.

15,000 employees
NFO, with 15,000 employees in 40 countries, is billed as the largest custom market research organization in North America and third largest in the world. While NFO is well-regarded, it's a logical asset for Interpublic to sell given that, one, it's not central to Interpublic's main business of marketing communications, and two, it should attract considerable buyer interest. NFO drew multiple bidders, including Interpublic rival WPP and an unidentified British research company, before Interpublic bought it.

An Interpublic spokesman declined to comment beyond what was in the company's brief announcement.

Observers have said NFO -- likely to sell at a price far below what Interpublic paid -- could be a good fit for such companies as Aegis Group, Ipsos Group, Taylor Nelson Sofres, United Business Media or VNU, which have stakes in market research; WPP; or a buyout firm such as Hellman & Friedman. These companies earlier declined to comment or didn't respond to calls or e-mail.

Interpublic's disclosure came one day after it officially signed Goldman Sachs, which was an adviser on Interpublic's 2001 acquisition of True North Communications.

IPG's troubles
The agency giant is laboring to regain credibility with investors following accounting restatements and weak operating performance. Acquisitions have saddled the company with $2.9 billion in debt, which ratings services have downgraded to one step above junk status over concerns about 2003 liquidity. Sean Orr, executive vice president and chief financial officer, last month said he and Chairman-CEO John J. Dooner Jr. have "a sacred commitment" to keep an investment-grade rating on debt and a corporate priority to reduce debt and "focus the portfolio."

Interpublic made its disclosure after the market closed Wednesday. The stock closed at $14.85, down 1% for the day. Mr. Dooner took over in December 2000 as the ad market was peaking. The stock under his tenure reached a high in January 2001 of $47.19; it's fallen 69% since then.

Beyond selling NFO, Wall Street analysts and ad industry executives expect Interpublic to jettison the racetracks it bought in 1999 in an ill-fated expansion of its sports marketing holdings. Interpublic in November said it is assessing "strategic alternatives" for the racing venture, Octagon Motorsports.

Need to raise cash
Interpublic said in Securities and Exchange Commission filings late last year it may need to sell "certain non-core assets" to raise cash.

A Dec. 12 filing said: "At any given time Interpublic may be engaged in a number of preliminary discussions that may result in one or more substantial acquisitions." That changed in a Dec. 18 filing: "At any given time, Interpublic may be engaged in a number of preliminary discussions that may result in one or more acquisitions or dispositions."

Interpublic also said in filings: "Unanticipated decreases in cash flow from operations as a result of decreased demand for our services and other developments may require the company to seek other sources of liquidity (including the disposition of certain non-core assets) and modify its operating strategies."

Still, there is no indication Interpublic is looking to sell major assets beyond NFO and the tracks. Multicultural shop GlobalHue is in talks to buy back the 49% stake held by Interpublic, but that's a comparatively small deal not seen as connected to bigger asset sales.

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