‘A Once-in-a-Lifetime Opportunity’: Stock Market, Account Wins Favor an IPO for Y&R–If It Wants One

Buoyed by its win of the $500 million Citicorp account, combined with favorable market conditions, Young & Rubicam Inc. is in prime position to move forward with an initial public offering, according to agency and financial executives.
With Chuck Peebler’s sale of Bozell, Jacobs, Kenyon & Eckhardt to True North Communications all but a fait accompli, speculation about the next big deal last week centered on when chairman and chief executive Peter Georgescu would try to take Y&R Inc. public.
Citicorp “could be a big plus” for an IPO, said Abe Jones, a principal in the New York-based investment banking firm AdMedia Partners. “A win like that is a once-in-a-lifetime opportunity for an agency. They’re also adding it on to some other major wins. If [Y&R] is seriously thinking about a public offering, this sure makes it a lot easier.”
The privately held parent of Young & Rubicam Advertising, Wunderman Cato Johnson and various other marketing services and public relations firms could embark on an initial public offering by the end of this year, according to sources. One executive put Y&R’s initial market capitalization at $1.5 billion-plus.
When asked about a possible IPO by year’s end, a Y&R representative said, “Such rumors are not true.” Asked whether there are longer term plans for a pubic offering, the representative said, “No comment.”
Y&R has been expected to go public since the San Francisco-based investment firm Hellman & Friedman took a minority interest last year.
Current stock market conditions–where agency stocks are trading at all-time highs–present Y&R with unprecedented earning potential.
“The market is not going to stay like this forever,” said one executive.
Before an IPO can occur, however, Y&R must file an S-1 with the Securities & Exchange Commission to notify potential investors of an IPO. The purpose of an S-1 is to provide information to investors so they can make informed decisions. Once a company registers with the SEC, the commission must approve the IPO. Sources said that process usually takes at least 30 days. A check with the SEC last Friday revealed that Y&R has not yet registered.
Last year, sources at Y&R speculated that the holding company could not go public until it got its financial house in order. That meant posting three consecutive years of strong growth. In 1993, Y&R had a poor showing, posting profits of only $5 million after taxes and other charges on revenues of $906 million, according to sources. Profits in 1994 increased threefold on revenues of $943 million. In 1995, however, Y&R’s fortunes began to turn, fueled largely by a string of account wins in Y&R’s headquarters office in New York. During the last two years, the agency has won significant business from Colgate-Palmolive, Blockbuster Video, United Airlines and AT&T.
In 1995, Y&R reported revenues of $1.2 billion, followed by a 12.9 percent year-to-year revenue increase in 1996 to $1.36 billion. Profitability figures for those years were not available. –with Joan Voight, Noreen O’Leary and Jim English