GGT’s Independence In Doubt




NEW YORK-Following the turmoil at Wells BDDP, and the subsequent precipitous drop in the value of parent GGT’s stock, the London financial community was busy speculating last week about GGT’s viability as an independent holding company. At least one analyst said it could become a takeover target.
“After the loss of P&G, you lose the conflict and now you can get everything at half the price,” one analyst said. Conflicts with P&G had blocked many suitors from acquiring the BDDP network.
Last Wednesday, GGT released its six-month earnings, ending Oct. 31, 1997, to London investors. Alluding to the P&G loss, GGT said, “It is expected that exceptional costs of $5 million will be incurred to resolve the situation.”
Ostensibly, those funds would be used to defray the costs of Wells’ new Manhattan headquarters as well as payouts for executives that will be dismissed as a result of the P&G loss.
GGT’s share price plummeted 40 percent on Wednesday before recovering slightly the next day.
GGT bought the French-owned BDDP last year at 11/4 times revenue. GGT’s stock is now selling around 2/3 times revenue.
“We expect any market reaction to be short-lived because of our knowledge of the underlying value of our business,” Greenlees said. He also asserted that the P&G loss would have no impact on servicing GGT debt from the BDDP acquisition. Greenlees added that there would be no added revenue expectations placed on GSD&M or Martin/Williams, GGT’s other U.S. agencies, to compensate for the Wells trouble.