CHICAGO-True North Communications and federal accountants are going over TN's method of stretching goodwill costs of acquisition even as sources said it is talking with yet 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 commission 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. The next day, 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 Cos. is in preliminary talks with TN over its possible acquisition. IPG has been circling TN [Adweek, Jan. 29] during TN's talks with Havas, which 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 may or may not decide to be a player once a serious bid by another is made, sources said.
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 rep could not be reached.
As for the SEC matter, TN CFO Kevin Smith said in a statement that it remains comfortable with early predictions of earnings at 91 cents a share and that the query involves "technical account ing matters which would not affect either our cash flow or … the underlying economic value of our business."
Smith and TN CEO David Bell were not available for further comment. Bachrach