Dentsu: IPO Is a Go

An economic downturn with no end in sight will apparently not stop Dentsu from pushing forward with plans to go public late this year, the company said.

Dentsu’s IPO on the Tokyo stock exchange, probably in late November, is expected to raise $1.5 billion, making it the largest in Japan this year. Much of that money is expected to be used to finance office construction and other capital investments.

But the expected in fu sion of cash has also led to speculation about Dentsu possibly expanding its current 20 percent ownership in the Bcom3 Group.

Even without the IPO money, Dentsu was said to be interested in increasing its stake in Bcom3 earlier this year, but that interest fell apart over price, sources said. Dentsu representatives said they now have no interest in owning any more of Bcom3.

“Dentsu is still focused on Bcom3 as our primary partner for the development of the breadth and depth of Dentsu’s services globally,” a representative said.

Bcom3 officials have repeatedly said it has not considered selling a greater percentage to Dentsu.

A partial sale to Dentsu doesn’t offer “a particular upside” to Bcom3, based on the company’s research, said Chris Kimball, general counsel for the holding com pany. “Any holder with one-third [ownership] or more looks like they control the company, and it starts to deflate the price,” he said.

Bcom3’s 20 million shares, 15 million of which are owned by 660 company shareholders, are controlled by a four-member “voting trust” composed of CEO Roger Haupt, vice chairman Rick Fizdale, chair of the executive committee Roy Bos tock and chief operating officer Craig Brown.

Those four voting-trust members collectively own 10 percent of the outstanding shares and cannot act unilaterally to sell any portion of the company. Any change in corporate ownership would require approval of a majority of all shareholders.

A sale would also require a revision of Bcom3’s charter, which now limits Dentsu’s ownership to 25 percent whether the company is public or private.

Bcom3, which in March called off plans to go public this year, still plans to issue an IPO, although no timetable has been set.

“That’s impossible to answer,” Kimball said. “The events of Sept. 11 and current market conditions haven’t done anything to accelerate the process.”

If the company has not gone public by Jan. 31, 2002, board control to force an IPO will shift in favor of Bostock and Brown. The two ran the MacManus Group at the time of its merger with the Leo Group to form Bcom3. Bcom3 is not required to go public by Jan. 31.

Kimball said the provision was placed in the company’s charter to give shareholders some confidence that the company-which was created through the merger of two formerly staunchly private entities-would follow through on its plans to go public.

If market conditions are still unfavorable on Jan. 31, it’s unlikely Bostock and Brown would push the deal forward. They are reliant upon the same market information as the rest of the board, Kimball said.

“The circumstances and dynamics and decision process around an IPO is so uniform that it’s not going to change the movement of an IPO,” Kimball said. “We expect the decision to go forward or hold off to be a unanimous decision. … It’s not as though Roy or Craig has an extra piece of information to push [it] forward.”