The future of London-based ad agency M & C Saatchi got a little murkier last week when the board of directors did an about face, based on the advice of financial advisors and withdrew its recommendation that shareholders accept an offer to buy from Next Fifteen Communications.
The board said the reversal was based solely on the decline in Next Fifteen shares since it made it offer, thus making it less attractive for Saatchi shareholders. That said, the board members themselves have signed irrevocable agreements committing their shares to Next Fifteen.
The board said it believed that Next Fifteen’s offer was still better than a rival bid from AdvancedAdvT and that if shareholders are going opt to sell it should be to Next Fifteen. A combination with the latter would be a better fit strategically, commercially and culturally, the board stated in regulatory documents.
So why did it withdraw its recommendation? Probably to avoid lawsuits from shareholders who don’t think they’re getting a square deal.
Next Fifteen said it was “disappointed” in Saatchi’s about face but indicated that it is proceeding with its offer anyway. In order to so, it has to get its own shareholders to approve a new stock issue so it can proceed.
Meanwhile, Saatchi noted that it’s standalone prospects at this point aren’t as rosy as it once proclaimed now that Advanced and its top executive Vin Murria own more than 22% of Saatchi’s outstanding shares. The spurned Advanced chief, who was booted off the Saatchi board two weeks ago, can make life pretty miserable at the agency if she chooses, given her power to call shareholder meetings and propose all sorts of changes, new policies, etc.
And Advanced has let it be known that if shareholders decide to reject both offers and remain independent the company intends to force a vote to get Murria back on its board.
The Saatchi board acknowledged that that scenario could prove to be a “significant distraction,” for pretty much everyone at the agency.
So it seems the agency is in a bit of sticky wicket for now.
Meanwhile a UK court has to approve the terms of the Next Fifteen deal and shareholders representing 75% of outstanding shares of Saatchi would have to approve it. A general meeting is scheduled for August to vote on the deal.
Looks like this story will have legs through the summer, maybe longer.