About That Publicis-IPG Merger: Never Mind
“Reader Beware,” the Financial Times Blog Alphaville warns near the top of its site. Reporters contributing to the blog don’t necessarily check the facts before running with a story. And the result is that some stories, the site acknowledges, turn out to be “complete rubbish.”
And that’s exactly what a report turned out to be on the FT site last Friday afternoon, regarding merger talks between Publicis Groupe and Interpublic Group.
Today Publicis issued a formal statement that indicated that the FT Blog story was, well, complete rubbish. No truth to it all. The blog then apologized for the story and basically told readers never mind— usually spot on sources got it wrong this time.
The Publicis statement read: “Following the speculations published by FT.com Alphaville and their resulting widespread publicity, Publicis Groupe denies having engaged in any discussions with Interpublic Group of Cos (IPG) and confirms that it has not commissioned any bank to undertake any such discussions.”
The story said that Publicis had been preparing a bid for six months and talking to a group of banks. An offer “in the region of” $15 per share would be made, the story confidently asserted. The market reacted Friday by driving up IPG’s stock price more than 13% to nearly $11 per share.
The one bank identified in the FT story was Rothschild. What the story didn’t say was that Rothschild is Publicis Groupe’s main bank. So at any given time one or more people from both sides are likely to be talking about something. But apparently not about a prospective purchase of IPG.
After IPG’s stock began its climb Friday, with volume up multiple times its average, the New York Stock Exchange requested that IPG put out a release. According to sources, if some big transaction was up that the company was aware that was moving its stock, it would have been required to disclose it, once it got the call from the NYSE.
IPG responded with this statement: “We are aware of the activity in our stock today. It is our policy not to comment on market rumors or speculation.”
The speculation about Publicis and IPG coming together is not new. And while nothing may be happening at the moment regarding the two companies, some analysts believe further consolidation in Adland is inevitable and that a case could be made for a Publicis-IPG Merger.
Pivotal Research senior analyst Brian Wieser stated in a note to clients Friday that Publicis would have many reasons to acquire IPG. Chief among them: CEO Maurice Levy’s interest in making the company the biggest global advertising powerhouse that he possibly can before he retires. Also, a merger with IPG would reduce Publicis’ “dependency on the slower growing European Market” while expanding its reach in the U.S. and fast growing Asian and Latin American markets.
And he said IPG could benefit too, citing his belief that while both companies would put new top management in place soon Publicis seems to be ahead in terms of succession planning. Also, “many of IPG’s assets are lacking scale in many countries, especially in Europe and much of Asia, where Publicis is much larger,” Wieser said.
But Deutsche Bank analyst Matthew Chesler opined in a client note that a Publicis-IPG hook up is not as strategically attractive as it once seemed. “We wrote a note on the logic of a possible combination to create “Interpublicis” in October 2006,” Chesler wrote, “so we are not surprised at the re-emergence of this story. He suggested that with Levy preparing to retire soon, the company may wait until new long-term management is in place before making a “transformational acquisition.”
Also, Chesler noted, Publicis has made a series of smaller acquisitions including Digitas, Razorfish and Rosetta which have focused on digital “but have also consolidated its US presence.” And with 50% of its revenues now coming from the U.S., “our view is that this deal is strategically far less compelling for Publicis now than it might have been six years ago.”