UPDATE: Publicis on Sunday formally denied that it has held any discussions with Interpublic, adding that it had not commissioned any bank to pursue such talks.
Apologies, but our usually knowledgeable sources turned out to be lacking on this occasion.
Yes, we’ve got a Friday afternoon outbreak of M&A speculation here on FTAV.
Our usually knowledgeable sources insist that Publicis of France is weighing a bid for its American rival, Interpublic Group (ticker IPG on the Nyse), worth $6bn or more.
Such a move, which has been mooted repeatedly in the past, would propel the enlarged advertising and media group to No 2 in the world, behind WPP, ranked by global revenues. Sources say a deal, which would be presented as a merger despite the size-differential in terms of market cap, has been under preparation for six months. Publicis declined to comment.
Publicis is said to be working with a group of banks, including Rothschild, on a mixed cash and shares package that would be pitched in the region of $15-a-share. That’s a huge premium to Friday’s market price of just under $10, but followers have pointed out that IPG was trading at $12 as recently as last month, before releasing a poorly-received set of Q2 numbers at the end of July.
Publicis is essentially ungeared, but it would have to raise finance to fund the cash portion of any deal.
While sector analysts have acknowledged the attractions of putting Publicis and Interpublic Group together, some have questioned the timing, with the architect of Publicis’ extraordinary growth, Maurice Lévy, due to take some sort of emeritus role soon. Other followers have said that while Lévy has indicated his intention to retire from executive duties, a successor has yet to be identified.
(It should be noted, in passing, that Publicis lost its head of acquisitions, former Goldman corporate financier Isabelle Simon, last autumn. That followed a string of relatively small acquisitions, but came at a time when Publicis had indicated it was keen to preserve cash.)
Blockages to a potential deal include a string of client conflicts: housing the likes of Procter & Gamble and Unilever under one agency roof would be problematic.
Sceptics also point out that merger speculation across the advertising sector has simply been fueled by the recent Dentsu deal to take over Aegis. Dentsu’s own strategic alliance with Publicis came to an end in February, when the French firm bought out a 15 per cent stake held by the Japanese.
Update — from Interpublic:
NEW YORK–(BUSINESS WIRE)–Interpublic Group (NYSE: IPG) issued the following statement: “We are aware of the activity in our stock today. It is our policy not to comment on market rumors or speculation.”