Bcom3’s IPO Blues

CHICAGO–When Bcom3 launched plans to go public a year ago, company officials acknowledged that an IPO was the only way to compete with better-financed rivals and avoid being “marginalized.”

With Bcom3’s decision last week to postpone its stock offering due to a softening economy and an inhospitable market, the company again faces the same questions it was hoping to put to rest.

“From a strategic standpoint, they will have to do something in the next year and a half or they’ll become further marginalized,” said Chris Hansen, senior advertising analyst at Bank of America. “They either need to build out their below-the-line capabilities, or they need to combine with someone larger.”

Bcom3 CEO Roger Haupt said the company remained “fully committed” to pursuing an offering, but declined to map out a new timetable. “I wouldn’t want to engage in speculation,” he said.

The IPO was expected to raise $4-5 billion. Its delay until at least next year renewed speculation that Bcom3 could be a prime takeover target.

“There’s speculation about anyone that’s left,” Hansen said. “There’s probably been some discussions among holding companies about whether [Bcom3] fits or not.”

Dentsu, which owns 20 percent of Bcom3, is expected to go public in Japan later this year. Some sources have suggested that the Japanese giant would use the cash to purchase the remainder of Bcom3.

Haupt said there were contractual limits concerning how much of Bcom3 Dentsu could own once Bcom3 is public. He would not comment on whether those limits applied to Bcom3 as a private entity.

Any buyer would have to acquire Dentsu’s share and contend with possible conflicts, such as Bcom3 unit work for General Motors. The Interpublic Group of Cos., whose units handle the bulk of GM’s business, had been a rumored suitor, although the company is thought to currently have its hands full finalizing the True North Communications acquisition.

Analysts agreed that delaying the IPO was a logical move considering the softening economy. So far this year, 80 companies have withdrawn their IPOs, compared with 25 during the same period last year, according to Richard Peterson, a representative for Thomson Financial Securities Data.

Bcom3 has not yet submitted plans for an IPO, saying only that it planned to file sometime between March and November of this year.

The “volatile market” cited by Haupt may not have been the only factor in the company’ decision to wait.

“The advertising industry hasn’t been in that great of shape,” said Jim Dougherty, an analyst with Prudential Securities.

Bcom3’s Leo Burnett laid off roughly 200 staffers in February. Though agency executives cited softening client spending and account losses as the reason, sources said the upcoming IPO was a major factor in the belt-tightening. The agency’s Leo Burnett Technology Group has also been hit hard as the bottom fell out of the dot-com market.

Haupt dismissed any suggestion that Bcom3’s fiscal health played a role in the delay, declaring the company’s operations to be in “very good shape.

“We’re simply confirming what the vast majority thought we would do,” he said of the delay.

“The more depressed the markets have gotten, the more speculation there has been about what we’re doing,” Haupt added. “There was no point in leaving a statement out there without indicating where we were going.”