The jockeying for Grey Global Group forged into the weekend as decision time loomed in the bidding for the holding company. At press time Friday, WPP Group and private equity firm Hellman & Friedman had emerged as the front-runners, with Havas said to be a distant third, even after revising its offer upward.
Grey's board met Friday to consider the bids. CEO Ed Meyer is reckoned to have the final say over its recommendation to shareholders. A deal was expected to be completed as early as Saturday morning, with an announcement early this week.
For Havas CEO Alain de Pouzilhac, the bid for Grey may actually end up backfiring. In the wake of its corporate restructuring of assets and debt, the French holding company has been relegated to an underperforming, midtier player. Grey represented its last chance to step up to the big leagues of agency ownership. Havas also stood to prop up its MPG media unit through the addition of Grey's MediaCom. (Contrary to rumors, it is unlikely that WPP would sell off Grey assets to Havas, should WPP pull off the acquisition, sources said.)
Havas' early talks with private equity firms such as Quadrangle fell through, but it ultimately secured financing through Deutsche Bank and Crédit Agricole's Calyon unit. Sources said that just hours before last Wednesday's bidding deadline, de Pouzilhac got his board to approve an offer by a vote of 10 in favor, 2 opposed and 1 abstaining. French corporate raider Vincent Bollore, who has amassed a Havas stake of 5-10 percent since the spring, is not on the board but made his disapproval of a bid known in the press. He was said to have since pledged his support.
"Havas' public fight for the board to grant approval and its difficulties in finding partners and raising money has made them look more desperate than anyone thought. The position of management is looking fragile now," said one source.
Havas, which initially offered $850 a share, or $1.18 billion, by the deadline, and H&F, which put forth a bid of $880 a share, or $1.22 billion, each increased their cash bids to more than $900 a share, sources said. (H&F is working in partnership with private equity/buyout giant Kohlberg Kravis Roberts.) WPP, which offered more than $900 a share in equity and cash, is thought not to have made any significant revisions in its original bid.
Meyer, 77, is known to want his contract renewed regardless of who wins the bidding, which should bring him more than $200 million for his more than 20 percent stake. H&F is said to want him out of a strong operational role, preferring to install ex-Young & Rubicam CEO Mike Dolan in the same role at Grey, with Meyer remaining chairman. WPP is expected to keep Meyer on in some capacity as well, but it is not known how much of a role he would play.
Key Grey clients such as Procter & Gamble are said to prefer a strategic partner like WPP over the likes of a private equity firm like H&F, which sees Grey as an investment to be flipped once its balance sheet is overhauled. Meyer is likely to be predisposed to H&F's all-cash terms. Regardless of who wins, one thing is sure: Major belt-tightening changes are in store as the company's anemic margins of around 4-6 percent must be brought more in line with industry standards, which are about double that.
Grey declined to comment on the bids, as did representatives for WPP, Havas, H&F and KKR. Dolan did not return calls.