Bcom3 Starts to Open the Door

Bcom3 is valued at $2.7 billion, according to a filing with the Securities and Exchange Commission. It showed the company lost $65 million last year due to several one-time charges. The Form 10-12G filing, required of all companies with more than 500 shareholders, outlines how the Chicago company’s governing board votes and the extent of Dentsu’s involvement.

Bcom3 was formed in March 2000 through the merger of the Leo Group and the MacManus Group, with Dentsu taking a 20 percent stake. The holding company oversees Leo Burnett, D’Arcy Masius Benton & Bowles and Starcom MediaVest Group.

According to the filing, Bcom3 has issued nearly 20 million shares, 15.4 million of which are controlled by a “voting trust” of CEO Roger Haupt, COO Craig Brown and “executive consultants” Roy Bostock and Rick Fizdale, both retired from the company earlier this year. Dentsu paid $493 million for its 4.3 million shares, noted the filing.

The company has offered 850 employees the option to acquire 950,000 shares at $130 a share. That price pegs the company’s outstanding value at nearly $2.7 billion. The company’s ultimate value would be determined when it goes public, based on how many shares it issues and the market price.

By comparison, True North Communications was valued at $2.3 billion in its recent deal with the Interpublic Group of Cos.

The seven members of Bcom3’s board now have equal standing. The balance of power would shift, however, if the company does not have an initial public offering by next January 31, according to the document. If there’s no IPO by then, Bostock and Brown, both from the MacManus Group, each get three votes to everyone else’s one, giving them a controlling majority of 6 to 5.

While that stipulation appears to place another deadline on Bcom3 to go public, Bcom3 executives noted that the decision to back off plans to go public this year received a unanimous vote. Subsequent delays could get similar approval. Once the company goes public, board members resume equal power.

The decision to delay the IPO in March led to speculation that Bcom3 might get absorbed by another holding company, with Dentsu as one candidate. Dentsu, however, has agreed to certain “standstill agreements,” according to the filing, which “preclude it from proposing, initiating, or participating in unspecified change of control transactions.”

Upon Bcom3’s public offering, Dentsu’s ownership would be limited to 25 percent. In the event no IPO is made by March 14, 2002, the board cannot give another company control without first giving Dentsu the opportunity to purchase it outright, per the filing.

Also, Bcom3 can reject Dentsu’s offer, but it must be made “at a price and on terms and conditions no less favorable than those specified in the Dentsu offering agreement,” states the filing.

Prior to an IPO, any takeover offer would have to be taken to a full vote of Bcom3’s current 660 shareholders, said company officials.

The document shows the company had 2000 revenues of $1.8 billion and a net loss of $65 million. Included in the net loss are one-time charges of $72 million to discontinue a Burnett shareholder loan program and $65 million for goodwill amortization associated with the merger. Without those charges, the company showed an operating income of $100 million.

The filing says nearly 49 percent of Bcom3’s annual revenue is from its top 20 clients, including Procter & Gamble, Philip Morris and General Motors. One of those clients, thought to be P&G although company officials did not confirm, accounts for 12 percent of the revenue, per the filing. More than half of the company’s revenue was from U.S. operations; another 28 percent was from Europe. The rest is from other points, including Asia, Africa and Latin America.

As CEO, Haupt received $2.2 million in total compensation last year. He also secured an employment agreement through 2004, with an annual base salary of $950,000. Former chairman Bostock received $1.8 million in total compensation, including $59,000 for transportation. Fizdale received nearly $2 million. Brown earned $1.5 million.