TN in Talks With SEC

True North Communications is trying to explain its process of stretching out the goodwill costs of acquisition to federal accountants even as sources say the holding company is engaged in early talks with another potential suitor.

The Securities and Exchange Commission last week raised questions about how TN has amortized the costs of non-tangible assets, or goodwill, from acquisitions, the company said.

The SEC started poking around after TN and its auditors at Arthur Andersen went to the body over an accounting matter involving Modem Media, of which TN owns 46 percent.

Modem Media delayed its earnings report last Tuesday because of issues regarding goodwill over its acquisition in February 2000 of Vivid Holdings. Modem had $56 million of goodwill on the books at the end of its third quarter, but Vivid’s value dropped precipitously later in the year. On Wednesday, TN put off its own earnings report because of the situation with Modem and subsequent SEC questions.

The accounting drama played out as sources said the Interpublic Group of Companies has engaged in preliminary talks with TN over possible acquisition. IPG has been circling TN during TN’s talks with Havas [Adweek, Jan. 29]. Those talks have all but broken off, sources said. Publicis, which is the largest shareholder in TN with 10 percent, is thought to be biding its time, and it is unclear if it will be a player once a serious bid by another company is made, according to sources.

IPG filed an SEC document acknowledging it is in “a number of preliminary discussions that may result in one or more substantial acquisitions.”

A TN representative declined comment on acquisition talks; an IPG representative could not be reached.

TN CFO Kevin Smith and CEO David Bell were not available for further comment.