IPG Moves Forward With Modem Divestiture

NEW YORK Interpublic Group is accelerating the divestiture of its Modem Media stock, increasing the number of shares it’s selling in a public offering from 7 million to 9.5 million, according to a statement.

The New York-based holding company, Modem Media’s largest investor, would realize about $55 million from the sale of the common stock, which is selling for $5.75, down from the last month’s proposed price of $6.62.

In November, IPG revealed its intention to divest itself of its 11.1 million shares, or 42.4 percent stake, in the Norwalk, Conn.-based interactive shop [IQ Daily Briefing, Nov. 19]. After the completion of the initial offering, IPG will own about a 6 percent holding.

IPG, owner of R/GA and Zentropy Partners, also has granted the underwriters an option to purchase up to an additional 1.45 million shares to cover over-allotments. If that option is exercised, IPG will be left with about 148,000 shares of the common stock. The underwriters for the offering are Jefferies & Company, William Blair & Company and Friedman, Billings, Ramsey & Co.

IPG inherited the Modem Media holding as a part of its 2001 $1.6 billion purchase of True North Communications, which took a stake in the i-shop in October 1996. Modem Media maintains that the divestiture will not impact its business because it does not have strategic ties to IPG.

In addition to IPG, two Modem Media principals plan to unload some of their shares in the public offering. Modem Media founder G.M. O’Connell, who owns a 9 percent stake in the company, plans to sell 150,000 of his 2 million shares, and director Robert Allen, who holds a 2.2 percent stake, intends to offer 50,000 of his 565,000 shares. That will leave the former with an 8.4 percent interest, or 2.2 million shares, and the latter with a 2 percent investment, or 515,000 shares.

Modem Media, which works with clients like General Motors and Kraft Foods, posted its third consecutive profitable quarter in Q3, recording net income of $2.1 million, or 8 cents per share. Third-quarter revenue for the interactive shop totaled $14.6 million, down 18 percent from $17.8 million in the year-earlier period and 6 percent from $15.5 million in Q2.

Modem Media stock (MMPT) was trading on the Nasdaq today at $6.87, up 92 cents, or 15 percent. Its 52-week high is $6.83 and 52-week low is $1.86. Interpublic Group stock (IPG) was trading on the New York Stock Exchange at $15, up 38 cents, or 2.6 percent. Its 52-week high is $16.50; its low, $7.20.