IPG Stock Price Dip Reignites Takeover Talk

NEW YORK Interpublic Group's share price has dipped below $8 a share again, reigniting buzz among insiders about the company's vulnerability to a takeover. But unlike, say, in the summer of 2006—when IPG's stock price fell below $8 for the first time in 15 years—financing for such deals is tight and rivals who might covet IPG are experiencing stock declines as well.Indeed, last week Omnicom Group, WPP Group and Publicis Groupe all saw their stocks trade at or near their 52-week lows amid a lingering downturn in the stock market. For example, Omnicom hit a new low of $44.28 on Friday and WPP hit a new low of $56.68 on Thursday. Still, none of those stocks trades as low at IPG, which during the course of Wednesday recorded a new 52-week low of $7.22 and ended the week at $7.40, down 9 percent from Dec. 31, according to Yahoo Finance.As recently as October, IPG's stock had traded above $10. In November and December, the price fluctuated between $8.02 and $9.64 before slipping below $8 on Jan. 2. The price has not risen above that Mendoza line since, leading some insiders to react emotionally and wonder not if, but when, the company would be sold. "[A sale] is just a matter of time now. I don't see how [IPG] can justify the stock price or continue to say a big turnaround is going to happen this year," said one agency executive in the IPG family. Not so fast say some who follow IPG, noting that the likelihood of a sale was slim, given the lending crisis, stock market slump and a general slowdown in deal-making recently. "The are not a lot of deals happening," said Alexia Quadrani of Bear, Stearns & Co. in New York. "People are nervous about any advertising stock and [IPG] being someone in a turnaround mode, it's much less attractive."To Alan Gottesman of West End Communications, the question for potential buyers revolves around value. "The price is down and it makes it cheaper. But I don't know if it's that much more attractive from a value point of view. That's the key," said Gottesman, who also is an Adweek contributing editor. "It's much more of a value issue than a price issue."If IPG's value outweighed the risk involved, then arguably, a deal would have been struck earlier, particularly when credit was more readily available and the economy was stronger, said Gottesman. And, even if competitors see IPG as a potentially valuable asset, they're "still facing the same fuzzy [economic] outlook because the fuzzy outlook isn't peculiar to IPG."On Friday, the No. 3 holding company had a market capitalization of $3.9 billion, compared $14.8 billion for market leader Omnicom and $14.4 billion for WPP, the No. 2 player, according to Bear, Stearns. IPG's enterprise value—a theoretical takeover price calculated as market cap, plus debt and preferred shares, minus cash and cash equivalents—was $4.4 billion.The company's market cap and enterprise value fell to similar levels in July 2006—$3.4 billion and $4.12 billion, respectively—after a complicated capital markets acquisition that investors appeared to react negatively to. Back then, sources said that would-be strategic investors like Publicis and Havas were closely following IPG's price decline and considering their options. Sources also pointed to interest among private equity firms.Asked about the most recent share tumble, an IPG representative said: "Market conditions have been very challenging in general and in particular for our sector. We made real operational progress in 2007 and our focus remains solely on executing against our 2008 plans. We'll see the benefits of improved financial results in our stock price once the broader economic situation begins to clear."

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IPG Stock Price Dip Reignites Takeover Talk

Andrew McMains

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