Publicis Groupe stock climbed nearly 7% in midday trading on the Paris Exchange Friday after a report that company officials held talks in December with an undisclosed private equity firm.
Publicis Groupe declined to comment on the report, published in Campaign.
The exact nature of the talks is unknown and it is not clear whether the equity firm approached the holding company or vice versa. Such discussions are common in the financial world and often conclude without any sort of transaction.
Sources familiar with the situation said that no current talks are underway. Campaign cited undisclosed sources that identified CVC, a Luxembourg-based private equity firm, as possibly having an interest in the holding company.
There have also been reports over the years that members of the family of Publicis Groupe’s late founder, Marcel Bleustein-Blanchet have had an interest in selling out.
The past year has been a tough one for Adland and most of the major holding companies including Publicis Groupe expect to report organic revenue declines for full year 2020. Through the first nine months of 2020, Publicis reported an organic revenue decline of 7.2%.
The firms have all taken aggressive steps, including layoffs, furloughs, spending and pay cuts and other measures to shore up balance sheets to weather the pandemic. And it doesn’t come as a great surprise that one or more of the holding companies might have approached or been approached by an equity firm looking to help in that regard with an investment.
The Groupe has considered major alliances in the past. Publicis and Omnicom made headlines back in 2013-14 for their attempt to come together in a $35 billion “merger of equals,” although the transaction collapsed when the two sides could not agree on numerous terms.
Industry watchers were intrigued by the report.
Consultant Avi Dan posted on his LinkedIn page: “Not a shock, if true. There've been rumors since the failed merger with Omnicom that Mme Badinter, the founder's daughter, will sell, and I wrote about PE entering the space. There is room for efficiencies (firing people), the business is on an up swing 2021 and stocks are cheap, so I expect more M&A this year.”
Analysts covering the company weighted in as well. Huber Research’s Doug Arthur tells MediaPost he would be “surprised” if the Groupe agrees to sell since Publicis has a “strong, fairly independent governing structure” and “given its rich heritage as a large, French company.”
That said, Arthur adds he would not be stunned if “private equity was sniffing around.” He notes the stock has rebounded strongly off the pandemic lows although it is not expensive — he rates it “underweight” — and as a public equity, has underperformed the rankings for the top French public companies for the past five years.
But Arthur also points out that private equity investors like consistent, sustainable revenues and global ad firms have proven to be quite volatile on the top line and are subject to major account wins/losses.
Morningstar’s Ali Mogharabi states there is “upside” for a potential buyer. He evaluates the company at 53 euros, 20% above its current trading at 44 euros. He points out the Groupe’s operational efficiencies, through its strategies like Power of One integration, will improve its financial performance by increasing its margin expansion.