NEW YORK Embattled Interpublic Group today said it would focus on enhancing shareholder value and improving operating performance on the heels of a denial by the Securities and Exchange Commission to reject IPG's request to block a sale proposal put forth by a company investor.
The SEC yesterday said it would not act to keep a proposal by shareholder Charles Miller off the proxy for IPG's 2005 annual meeting. That proposal could lead to a referendum this fall on whether to sell the company.
In a brief statement today, IPG said, "Our primary responsibility is to enhance shareholder value and we regularly review all options that might achieve this end. In order to maximize shareholder value, our best current course of action continues to be resolving financial reporting issues and improving operating performance by focusing on key assets and resources."
In a research note, Lauren Fine Rich, who follows IPG at Merrill Lynch, said she found it "difficult to see the value of a sale."
She went on to say, "We found that IPG cannot be sold at a price above or equal to yesterday's closing price [$11.05, down 22 cents]. In addition, financial results for the company could be restated downward."
Fine also argued against a breakup, saying, "It would be imprudent to sell individual businesses as we think IPG could be disadvantaged by offering less marketing services capabilities than its peers."
IPG last week disclosed that the latest company restatement is due, in part, to "violations of laws," the "misappropriation of assets," "inappropriate customer charges" and "falsified books and records."
Weak financial controls are one thing; the specter of a more serious breach at the company leaves it vulnerable to difficulties ranging from a possible rash of new shareholder lawsuits to potential repercussions from clients at its operating units [Adweek, Sept. 19].
The SEC has been investigating the company's accounting practices since 2003. Last Thursday, IPG said it will restate earnings for 2000-04, due to problems in accounting for revenue, acquisitions and lease expenses. It will be the third restatement in three years at the No. 3 agency holding company. The amount involved will be revealed by Sept. 30, with the company admitting last week that the "impact on our results of operations for all periods will be material."