IPG In Play Post Omnicom, Publicis Breakup
The best way to move beyond a breakup is with a new partner. That’s the theory driving up shares of Interpublic Group, $IPG.
— Howard Lindzon (@howardlindzon) May. 9 at 07:12 AM
Investors on StockTwits.com believe Omnicom, $OMC, and Publicis Groupe may salve the pain of their aborted $35 billion merger by pursuing other firms—and Interpublic Group is at the top of the list of desirable ad companies.
IPG was among the top five trending tickers on StockTwits early Monday morning. The fourth largest ad firm, by market cap, has a valuation of $7.56 billion and 46,000 employees. It reported an $11.7 million loss in the first quarter of this year on $1.64 billion in sales. Management says the company is on track to grow 3% to 4% with margins of 10.3%. The stock trades at $17.84. Consensus price target is $18.02, according to stats on the Analyst Ratings Network.
IPG says it’s not for sale. In an email response to StockTwits.com request for comment, IPG press officer Thomas Cunningham pointed to a memo sent from IPG CEO Michael Roth to IPG employees in the wake of the Omnicom/Publicis announcement.
“With the breakdown of the “POG” merger, competitors who have no knowledge of the situation are raising speculation about the possibility of future consolidation in our industry and what this might mean for us. As I have said before, there is no compelling reason for IPG to merge with another firm – we are competing at the highest levels and are winning business from our largest peers. We do not have gaps in our offering, either geographically or by marketing discipline, and we are backed by a powerful balance sheet.”
Such comments have not stopped the speculation, however. Omnicom and Publicis are considered potential suitors. Omnicom and Publicis Groupe each have around an $18 billion market cap and had sought larger scale to help grow their client base and digital operations, among other things. The theory is that WPP Group, $WPPGY, the largest ad company with a market cap of $28.32 billion, has appealed to clients with its size and promise of one-stop ad shopping.
Other names have been thrown into the mix as well. WPP Group CEO Sir Martin Sorrell told financial press that Japanese ad and public relations giant Dentsu could seek to combine with IPG.
$IPG (+3.1% pre) WPP Group plc CEO: Dentsu may bid for IPG in future, sees further industry consolidation
— Open Outcrier (@openoutcrier) May. 9 at 09:10 AM
Omnicom and Publicis announced Thursday that they had “terminated their proposed merger of equals,” announced July 27, “by mutual agreement.” They cited difficulties completing the deal in a reasonable timeframe and the uncertainty the prolonged negotiations created for employees, shareholders and clients as reasons for calling off the union. WPP Group told the Wall Street Journal that it had nabbed Omnicom and Publicis clients put off by the merger.
When the firms initially announced the merger, Publicis’ CEO Maurice Levy had said clients would benefit by more comprehensive analog and digital services, and greater global scale. Management at both companies promised synergies and revenue growth acceleration.
Levy told Reuters that Publicis will pursue smaller acquisitions. Omnicom may also need to pursue smaller acquisitions to convince shareholders it deserves its valuation. Goldman Sachs downgraded Omnicom to neutral this morning from “conviction buy.” Goldman analysts said Omnicom has a less compelling valuation without Publicis. The price target was lowered to $75-per-share from $87-per-share.
— Analyst Ratings Network (@AnalystRatingsNetwork) May. 12 at 07:25 AM
Other analysts have also said Omnicom could suffer from the failed merger.
— SIAnalystWire (@AnalystWire) May. 9 at 09:09 AM
And what better way to end breakup suffering than by going shopping.
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