• by Joe Mandese  @mp_joemandese, October 12, 2005

If an earnest offer is going to be made to acquire big independent media services company Aegis Group, it will likely come in the next 24-hours leading up to a board meeting that will take place tomorrow in Chicago. The gathering, a previously scheduled annual meeting, would be the most opportune time to get the attention of the full Aegis board, which has had to endure months of speculation, plenty of pronouncements, and a dramatic reordering of its biggest shareholders. While no material offer has been made to date, at least two suitors - Publicis and WPP - have lined up financing and are poring through so-called "black books" provided by the Aegis board.

"It may be time to fish or cut bait," says one insider, questioning whether any of the suitors are serious about taking over what has emerged as the largest pure-play media services company in the world, and one that would tilt the balance of power among the big agency holding companies if it were acquired.

With more than $20 billion in worldwide media billings from media networks such as Carat, Vizeum, Isobar and Posterscope, the acquisition of Aegis would instantly transform either WPP or Publicist into the undisputed industry leader. It would also further distance Paris-based Havas into even more of a media-buying also-ran, raising new questions about its long-time viability. So it's no surprise that French financier Vincent Bollore has been gobbling up shares of Aegis stock. This morning, Bollore, the controlling shareholder of Havas, disclosed he has raised his Aegis stake another smidgen to 14.71 percent of Aegis' stock. While that's not yet enough to cede control, it is enough to potentially block another takeover offer - or to profit handsomely from it.

That, of course, puts Bollore in the catbird's seat, and has raised new speculation that he may be seeking to broker a long-term independent relationship between Havas, the parent of media buyer MPG and Aegis. Both Bollore and Aegis CEO Robert Lerwill have indicated as much in interviews in the past several days in the European financial press, suggesting that Aegis may not go into play after all.

But the changes that have already been wrought in the holdings of Aegis major shareholders have already inexorably altered the complexion of the company, which had been controlled mainly by large, sedentary institutional investors and fund managers, but whose future will be driven by far more aggressive, activist shareholders seeking a quick return on their investments, or a dramatic increase in profits, cash flow and shareholder equity.

The second scenario is a potentially unsettling one for the rest of the marketing services industry, especially other big media buying organizations, because Aegis media shops already have been growing fast, gobbling up big blue chip accounts, while simultaneously achieving some of the best margins ever recorded in the business. If the Aegis units were forced to suddenly turn even more aggressive and to begin competing on the basis of price, it would set off a new round of competition that could further drive the margins of a media services industry that is already struggling on turning a profit.

That issue was raised by Jack Klues, CEO of Starcom MediaVest Group and a member of the Publicis Groupe Media board two weeks ago during a keynote at MediaPost's Forecast 2006 conference in New York. Klues, visibly exacerbated by the contradictory trend toward increasing media services and declining compensation models, warned that the industry is fast approaching an inflection point, and even offered to meet with the heads of the other major media services groups, and key clients to try and come up with a solution.

Adding Aegis group, a company that has so far competed on the basis of strategy, enhanced services, as a price competitor, could be the breaking point. Assuming it is not acquired first.

Agency Holding Companies Ranked By 2004 Media Billings

WPP Group:           $48.055 billion  
Omnicom:             $25.230 billion  
Interpublic Group:   $27.870 billion

Publicis Groupe:     $34.635 billion  
Aegis Group:         $20.355 billion  
Havas:                $8.775 billion  

Source: RECMA Report.