NEWS ANALYSIS: Levy Looms Over TN-BJK&E Deal

Despite Being Rebuffed, Publicis S.A. Chief Assembles M&A Team PARIS--A formal, hostile takeover bid for True North Communications by Publicis S.A., its former global alliance partner, remains a possibility, sources said. Despite being rebuffed recently by TN, Publicis is likely planning another move. Publicis chief executive Maurice Levy has assembled an advisory team of noted merger and acquisition specialists, including attorney Martin Lipton, leading some to believe a takeover bid is in the offing. On Nov. 10, the TN board received a letter from Levy proposing an offer to buy TN for a value of $28 per share. In the letter, Levy said TN's pending acquisition of Bozell, Jacobs, Kenyon & Eckhardt is misguided. Publicis' move stunned and amused many, with some wondering if this was merely a parting shot at TN chief executive officer Bruce Mason following years of public feuding. Levy dismisses the notion that he is simply out to be a thorn in Mason's side. He said Publicis--as the largest single TN shareholder--wants to scuttle TN's pending acquisition of BJK&E because it does not provide the global network TN seeks. In his letter, Levy argued that a TN-Publicis combination would create "one of the strongest communication groups in the world." "I am not driven by bitterness or revenge," Levy said. "I see True North doing a stupid deal and I am trying to stop it." Levy may be right that the pending TN-BJK&E deal will not provide the international clout TN needs. But he may be too late to stop it. Executives at TN, which hopes to garner enough shareholder support to overcome Publicis' opposition to the TN-BJK&E deal, are anxiously awaiting Levy's next move. "We don't think he's done. He'll try another trick to gum up the works," said a TN source. "We just don't know what." Under the terms of its agreement with BJK&E, TN agreed not to consider any third-party takeover overtures unless it involved only stock in a widely held public company. Levy, however, blames TN's alleged failure to provide Publicis with essential financial data surrounding the BJK&E deal for preventing him from drafting a more detailed offer. There are a number of possible scenarios behind Publicis' overture to TN, besides a hostile takeover. Others speculate Publicis may be hoping to gain leverage to engineer a stock swap. TN owns 26 percent of Publicis Communication, an agency group in Europe controlled by Groupe Publicis S.A. Publicis may want total control of Publicis Communication and would swap its shares in TN to make that happen. Publicis officials denied an all-Publicis Communication share deal has been discussed, insisting cash will comprise part of any offer as well. It is unclear how much leeway Michle Bleustein-Blanchet will give Publicis in developing various cash and stock offers for a TN takeover. The daughter of Publicis founder Marcel Bleustein-Blanchet is trying to sell her shares in Publicis and its Somarel holding company parent. Nevertheless, as a member of the Publicis board, she was part of a recent unanimous vote in favor of the friendly overture to TN. Sources said she could withdraw her support for the TN bid if it risks diluting the value of her shares, now estimated to be worth $200 million. Short of making a formal takeover bid, Publicis might benefit from delaying the TN-BJK&E deal until 1998, according to some observers. If TN buys BJK&E, Publicis' 18.5 percent stake in TN will be diluted to about 11 percent. The decrease in equity would increase Publicis' tax liability. As a major shareholder, Publicis will also have to assume its share of the multimillion dollar charge TN will take for post-Bozell restructuring costs, and Levy may want to delay that until 1998's first quarter. "Nonsense," said Levy. "I would not make all this noise simply to push finances back a few weeks." Analysts also doubt that was of concern to Publicis. "True North only contributes about 10 percent to Publicis results, so there's a limited impact," said Arnaud Frerault, an analyst with Societe Generale in Paris. A third scenario explaining Publicis' actions is that Levy hopes to boost the value of his TN stock in order to sell it before the TN-BJK&E deal goes through. TN's stock jumped around two points to $26--$2 below Levy's proposed offer price--after Publicis made its letter to the TN board public. Continued speculation concerning a Publicis or some other bid for TN could raise the price still further. TN and Publicis downplayed this theory, but for different reasons. "There's no way Levy is trying to force us to buy Publicis' stock back, said a TN source. "We've offered to buy it back before and he's always wanted to keep it." One Publicis official said TN has never asked to buy its shares back, "contrary to TN statements." Such conflicting versions of events reflect the differences between TN and Publicis that make a renewed union between the two the most unusual scenario of all.

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NEWS ANALYSIS: Levy Looms Over TN-BJK&E Deal

Daniel Tilles

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