• by Joe Mandese  @mp_joemandese, September 6, 2005

Aegis Group, the big media services and marketing research conglomerate that is the subject of heavy takeover speculation, Tuesday revealed what may be fueling the interests of suitors: strong growth in revenues and profits, and an organizational structure poised to benefit from fundamental shifts in both the media and marketing world. Aegis reported first half revenues of $718 million, an increase of 14.8 percent over the first half of 2004. Gross profits rose 14.5 percent to $622 million.

That growth helps explain why Aegis has become the focus of takeover talks, which began months ago as investors began questioning the relatively low trading price of Aegis' shares. That relative value no doubt inspired French corporate raider Vincent Bollore to acquire more than 6 percent of Aegis last month, sparking speculation that Bollore, who had made a similar initial stake in French-based Havas a year earlier, might be contemplating a similar creeping takeover of U.K.-based Aegis. On Sunday, British paper the Sunday Telegraph reported that Omnicom, the world's largest advertising company, made a $2.7 billion offer to acquire Aegis late last year, which was rejected by the Aegis board. According to the paper, the offer amounted to between $2.30 and $2.40 per share, which was deemed too low by Aegis' board. Aegis shares are currently trading at about $1.50.

No doubt the Aegis board sees huge potential upside for its brands of media and marketing research services, as evidenced by the strong first half results, and an especially strong outlook despite the company's view that the worldwide ad economy is, in its own words, "benign." (See related story in today's MDN

"The media industry is in transition and the shift away from traditional broadcast media towards digital media that marketers have been talking and speculating about appears to be well underway," the company said in its first half release. "Crucially, this means that agencies will need to develop communications plans based on a deep understanding of consumers and of the many new media channels that are emerging. Aegis is well focused on this new model and is strategically well placed to benefit from the changes that are occurring."

The attractiveness of Aegis new model focuses on three key elements: 1) It is far less reliant on traditional media and advertising services - particularly creative - than traditional agency holding companies like Omnicom, WPP Group, Interpublic and Publicis; 2) It is has made significant strides in building out its Isobar digital media network, now ranked as one of the world's largest; and 3) It has built an impressive portfolio of marketing research services, including MMA, one of the original marketing mix modeling firms in the U.S.

"Much of the progress that Aegis Media has made in both growing market share and profit is due to its investment in new areas such as digital, event marketing, communications planning and from the oldest medium of all - outdoor," the company noted. "Isobar, our digital agency, in particular continues to achieve very strong growth as clients turn a growing percentage of their marketing spend to online marketing."

Billings for the Aegis Media group, which includes Carat, Vizeum, Isobar and Posterscope, grew 4.3 percent during the half, and revenues rose 13.0 percent to $305 million. Organic revenue growth was nearly 5.2 percent. The unit won $837.4 million in net new business compared with $1.156 billion in 2004, which included the substantial P&G win in the U.S.

In the U.S., new business wins for Carat Americas included Revlon, Motorola and Visa.

"The pipeline of new business pitch activity has improved with a number of pitches in progress," the company also indicated.