IPO may allow Dentsu to deal

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In a scaled-down initial public offering in Tokyo next month, Dentsu will gain a strategically important stock exchange listing that could help the Japanese ad giant do more deals in the future.

One of those deals could be the acquisition of Bcom3 Group, in which Dentsu already has a 21.7% stake.

Although Dentsu will raise only about $82.5 million from issuing 25,000 new shares Nov. 30, several of its major Japanese shareholders will raise cash for themselves by selling 110,000 existing shares worth about $354 million.

The total $436.5 million sale represents about 9.7% of Dentsu, indicating a valuation of $4.5 billion on Dentsu. A few Dentsu subsidiaries are already publicly listed, but not its advertising holdings.

With the Dentsu IPO going ahead despite the worsening economy, attention is turning to Bcom3.

When Bcom3 was formed in January 2000 with the merger of Leo Group and MacManus Group, both Dentsu and Bcom3 intended to do IPOs in late 2001.

It's a different world now. Bcom3 in March postponed IPO plans because of the economy. Several deadlines from the purchase agreement with Dentsu now are creeping up. If Bcom3 doesn't go public by March 14, 2002, Dentsu can sell its shares to institutional investors and has first refusal on buying Bcom3 for another three years.

Dentsu plans to spend its IPO cash on smaller ventures such as an exclusive network of Asian media agencies. Dentsu is also pouring money into a lavish new headquarters office tower.

It's unclear to what extent Dentsu and Bcom3's futures will be linked as both wrestle with global expansion. Dentsu, the world's No. 4 agency holding company, has struggled to grow outside the Japanese market it dominates. Bcom3 agencies have so far failed to break into the top 10 global ad networks: Leo Burnett Co. is the No. 11 U.S.-based network by worldwide gross income; sibling D'Arcy Masius Benton & Bowles ranks 15th.

In one sign of their developing relationship, Dentsu and Bcom3 are working together most closely in Japan, where the local Burnett and D'Arcy shops merged with a unit of Dentsu a year ago to form a single agency called Beacon, whose biggest client is Procter & Gamble Co. In Australia, Dentsu's office merged with D'Arcy in July.

Contributing: Mercedes M. Cardona, Campbell Gray and Kate MacArthur

Burnett imports U.K. creative: AdAge.com QwikFIND AAM7OB.

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