• by David Kaplan , September 7, 2004

As Wednesday's bidding deadline for Grey Global Group arrives, it appears as if the only serious offers are expected to come from two major global ad agency holding companies, WPP Group and Havas, though a maverick shareholder of the latter is opposing the deal. A third offer, from San Francisco-based venture capital firm Hellman & Friedman, which has teamed up with the leveraged buyout firm Kravis Kohlberg Roberts, is bringing up the rear, executives familiar with the bidding said.

WPP is expected to offer slightly more than Grey's market capitalization of $1.25 billion, while rumors that Havas might bid as much as $1.45 billion has been bruited about among advertising industry executives and observers. Hellman & Friedman's bid is said to be in the $800-million range, sources said. WPP, Havas, H&F and Grey representatives were unavailable for comment.

While Havas has not declared a decision to make a bid, sources said that the company is desperate to devise ways of increasing its financial and creative strength, and to dispel its image as a "second-tier, also-ran" in the United States.

At least that's the view of Havas CEO Alain de Pouzilhac. He is being opposed by Vincent Bollore, the French corporate raider who reportedly acquired a 5 to 10 percent stake in Havas. Bollore apparently considers Havas' financial state too precarious to absorb the cost of buying Grey. It is nevertheless uncertain whether Bollore can lead other shareholders in killing a bid from Havas.

According to Reuters, Havas has scheduled a board meeting for today to discuss the offer.

Aside from that drama, Sir Martin Sorrell, WPP's chief, is known for his acquisitive nature and his reputation for ultimately making offers that are hard to refuse. For example, three years ago, he muscled Havas out of the way when the two battled for British independent CIA Medianetwork. Sorrell quickly won out and merged the smaller agency with WPP's The Media Edge, naming the new entity, Mediaedge:cia.

"It's going to be a rumble in the jungle, but it will all come down to what [Grey CEO] Ed Meyer wants for Grey," a Wall Street observer said. Meyer has run Grey for nearly 35 years and maintains voting control over some 70 percent of the company's shares.

While it's easy to see the benefits a powerhouse like Grey could add to Havas, how it would fit with WPP is more difficult. For one thing, WPP has two major media agencies - MindShare, in addition to Mediaedge:cia - and is considering forming a third smaller shop to handle potential conflicts for the other two. Some have speculated that after buying Grey, WPP might sell Grey's media unit, MediaCom, which has a market valuation estimated at almost $370 million and annual billings of $13.6 billion, according to TNS Media Intelligence/CMR.

MindShare's estimated market valuation is $19 billion and an estimated market cap of $533 million; Mediaedge:cia's estimated market valuation is over $400 million and has billings of $14.6 billion. In comparison, Havas' MPG USA has a market valuation of roughly $255 million and billings of $8.6 billion.