The Interpublic Group of Companies Inc., New York, has agreed to buy True North Communications Inc., Chicago, for $2.1 billion in stock, creating the world's largest marketing communications conglomerate.
In an announcement yesterday, Interpublic said it would exchange 1.14 shares for each outstanding share of True North, which has an estimated 51 million shares outstanding.
If shareholders approve the transaction, Interpublic would oust WPP Group PLC, London, as the world's No. 1 agency holding company. The deal represents the first major industry consolidation after France's Publicis bought Britain's Saatchi & Saatchi last year.
While some see virtue in the acquisition, there is also a contrary view.
“They're at it again, the capitalists of Madison Avenue,” said Gary Burandt, executive director at ICOM, a network of 70 independent agencies in 43 countries.
“You wonder who benefits from this,” Burandt said from Rollinsville, CO. “The clients benefit? Not really. There'll be a few senior staff who'll get rich and a lot of junior staff who'll get redundant.”
While major clients at both groups may have been warned of the impending acquisition, Burandt believes that some conflict-of-interest issues might crop up.
“What it'll do is create a great deal of distraction at the True North and IPG agencies,” he said, “because people are going to be sitting around wondering, 'How is this going to work? Where are the conflicts and where are the duplications?' “
Calls to Interpublic were not returned yesterday.
True North's decision to forgo its independence could stem from its November loss of the $2.4 billion DaimlerChrysler Corp. account to rival Omnicom Group, New York. The automaker accounted for 9 percent of True North's revenue and a quarter of its profits.
The DaimlerChrysler loss, however, was offset by new account wins such as AT&T Business Services, H.J. Heinz Co., Mattel Inc.'s Fisher-Price, Samsung global branding and major Kraft Foods brands.
With these accounts, and excluding the DaimlerChrysler loss, True North's net wins totaled $1.25 billion.
True North registered billings of $1.5 billion last year.
Interpublic and True North both boast agencies offering a plethora of marketing services, including advertising, direct and relationship marketing, interactive, healthcare, media services, event and promotional marketing, public relations and branding.
Interpublic and True North would report combined pro forma 2000 revenue of $7.2 billion. Pro forma profit for that period is estimated at more than $1 billion. The combined entity would serve 40 international accounts in more than 20 countries. It would have a presence in 130 countries.
Interpublic would add a third global agency network, True North's FCB Worldwide, Chicago. Interpublic already counts McCann-Erickson WorldGroup and the Lowe Group, both New York-based global agencies, as part of its portfolio.
The True North buy also will bring to the table smaller agencies such as Temerlin McClain, Tierney Communications, New America Strategies Group, TN Media, R/GA, BSMG Worldwide, Marketing Drive Worldwide and the Bozell Group.
True North chairman/CEO David Bell would become vice chairman of Interpublic. John Dooner would remain chairman of Interpublic.