A Second Major Investor Takes Stake In IPG

Harris Associates has taken a nearly 3% stake in Interpublic Group, the Chicago-based investment company has confirmed.

Word of the investment didn’t circulate widely until a Wall Street Journal story earlier this week. But the company disclosed the stake in a letter to investors last month that summed up its second quarter activities.

Harris is the second big investment firm to disclose a new stake in IPG recently. Last month Elliott Management disclosed a recently-accrued 6.7% interest in the holding company.

Harris has been an ad industry investor for years. Back in the 1990’s Harris played a large role in ousting the Saatchi brothers from the agency they founded because the firm felt the shop was being mismanaged. Saatchi & Saatchi was subsequently acquired by Publicis Groupe.

In the case of IPG, Harris told investors it took a position in the firm because of its improved financial performance under current management.

“We believe that Interpublic Group’s improving margins and shareholder-friendly decisions position it for future success within the advertising and marketing industry,” Harris stated in its investor note. “We also like that its management team has steered the company towards strong free cash flow generation and a capital-light business model.”

IPG CEO Michael Roth and CFO Frank Mergenthaler joined IPG in 2005 with a mandate to implement a turnaround strategy as the company was still reeling from an accounting scandal dating back to the earlier part of the decade. 

Harris views that turnaround strategy as a success.  “In addition to its improving margins, we believe its media buying business is especially attractive because of its large scale.  Lastly, we view management as good stewards of shareholder capital, having returned $1.9 billion to shareholders via dividends and repurchases since 2010.”

While IPG is considered by many to be an M&A takeover target, Harris did not mention that potential as being part of it investment strategy, unlike Elliott, which has strongly suggested it would like to see the company sold so it can quickly capitalize on its investment.

Harris previously held a stake in IPG which it unloaded before the arrival of CEO Roth. It also currently holds stakes in both Omnicom and WPP. 

Recommend (4) Print RSS