New York Ed Meyer has finally made his move. With Goldman Sachs among those helping him explore sale options, the chairman and CEO of Grey Global Group—the most significant independent ad network left—must now decide which suitor is the best fit. Signs point to Publicis and Omnicom, insiders said last week.
Since Grey shares its largest client, Procter & Gamble, with Publicis Groupe, the latter appears the most appropriate suitor.. According to its most recent 10K filing, Grey Global Group, the No. 7 global network and the parent of 87-year-old ad unit Grey Worldwide, had $1.3 billion in revenue. P&G comprises 10.6% of its consolidated revenue, or about $140 million, according to the filing. Still, Publicis would face conflict challenges, as it works for L'Oréal while Grey handles P&G's health and beauty care brands.
Others said Omnicom Group would be the only company besides Publicis with the resources to make such a purchase. Publicis and Omnicom executives could not be reached.
Meyer, 77, who has been chairman, president and CEO of Grey since 1970 (he joined Grey in 1956), owns about 20 percent of Grey but controls more than 50 percent of the voting power. He will have the final say in any change of control. "At the end of the day, it's all about Ed's exit," said one observer. "Whoever buys it will be getting a good deal."
Meyer was traveling last week and unavailable for comment. Grey and Goldman Sachs denied all comment.
Bringing in Goldman Sachs points to two scenarios, a source said: an outright sale that would further enrich the longtime senior management at the holding company and its 13 partner companies; or an equity offering that would raise capital to enable the Grey name to continue while empowering the next generation.
Steve Blamer, 48, North America CEO of Grey Worldwide and Meyer's heir apparent for the past four years could not be reached.
"My bet is that if Ed is looking to enhance his personal situation, it's a sale," a source said. "If he's looking to keep Grey as a living, breathing organism, it'll be an equity offering, and Ed takes a chairman emeritus title."
The company's stock hit a new high last week on Nasdaq, raising speculation about a possible sale. "We knew something was up," said another source. "And Ed recently re-did his retirement package."
Outlined in documents filed with the Securities and Exchange Commission, Meyer is entitled to an annual pension of about $1 million for life; $5,000 a month as a consultant to Grey; and a $3 million payout five days after he leaves.
It is difficult to estimate a price tag for Grey because of several factors, including the number of bidders (the more bidders, the higher the price); the fact that historically Grey has commanded a subpar valuation relative to other publicly traded ad stocks; and that it has shunned public visibility and is not followed by analysts. However, one industry insider estimated a 25 percent premium over Grey's share price before word of the Goldman Sachs hire started leaking out. On June 18, Grey closed at $754, which would mean it could fetch close to $1,000 per share. (The common equity of the company is represented by 1.359 million shares.)