Mr. Herro, managing director-international equities at Chicago money manager Harris Associates, in recent months unloaded Harris' stake in Cordiant Communications Group, where Harris last year was the No. 1 shareholder (AA, Feb. 24). But Harris remains a key shareholder in Publicis Groupe, which wound up owning Saatchi, and Mr. Herro enthuses about Publicis Chairman-CEO Maurice Levy. "We're investors in Publicis, and we're very happy," said Mr. Herro.
Mr. Herro, 42, and Saatchi have a storied past. Mr. Herro bought into the Saatchi brothers' agency company in the early `90s at the State of Wisconsin Investment Board and then at Harris, a Chicago value-oriented money manager that took about a 10% Saatchi stake. The straight-arrow Midwesterner, outraged by Maurice Saatchi's free-spending ways, led a shareholder revolt forcing out the flamboyant chairman in 1994.
`quadruple our money'
Mr. Herro held onto the stock, which split into two companies in 1997: Cordiant Communications Group and Saatchi & Saatchi PLC. The stocks took off in the euphoric market of '99, and Mr. Herro sold both a few months before Cordiant peaked in March 2000 and Saatchi agreed in June 2000 to sell to Publicis. "We made about quadruple our money," said Mr. Herro, with a 380% return on Harris' original 1992 investment after dividends, currency changes, stock rights issues and the 1997 restructuring.
But Mr. Herro didn't quit while he was ahead. When Cordiant went into a post-9/11 free fall in 2001, Mr. Herro jumped back in, accumulating shares till Harris was the No. 1 shareholder with nearly a 10% stake in mid-2002. As Cordiant labored with account losses, debt and a slumping ad market, the stock tumbled. Mr. Herro late last year sold the stock at a loss, cutting Harris' overall Cordiant/Saatchi gain to about 320%. "I doubt if we will ever return," he said.
He's still high on the category, attracted by values in a down market. Harris has a 3% stake in Publicis and a 12.2% stake in Aegis Group, parent of media buyer Carat. He sees Aegis as a well-managed operation with potential, though he also thinks it could be bought within a few years. Harris also owns 1.8% of Japan's Asatsu-DK.
Finally, Harris owns 5.7% of ailing Interpublic Group of Cos. It bought into Interpublic in late 2001, when a Harris-managed mutual fund cited it as an example of a "high-quality, large-capitalization growth company" available at a value price.