Publicis Files on Bcom3 Deal

Bcom3 shareholders’ payout from the sale to Publicis, details of negotiations between the two companies and deadlines for the deal’s completion were laid out last week in a lengthy filing with the Securities and Exchange Commission.

Much of the document covers what Bcom3 shareholders can expect to reap from Publicis’ estimated $3 billion takeover, which will take place in two parts.

First, shareholders will get $32.62 in cash per share, along with newly issued shares totaling about 80 percent in number of what they held.

The cash will come from Dentsu’s payment of nearly $500 million to increase its stake in Bcom3 prior to the Publicis merger. (Dentsu will have a 15 percent stake in the new Publicis.)

Shareholders then will receive a mix of cash, Publicis shares, equity-linked securities and warrants for their adjusted Bcom3 holdings. For each reduced Bcom3 share, holders will receive 1.66 Publicis ordinary shares, 0.55 shares of nonvoting interest in Publicis and 0.098 equity-linked securities that will mature over a 20-year period beginning in 2005.

While the value that each share holder stands to gain cannot be precisely determined because of the volatility of Publicis stock, research on the deal by Morgan Stanley offered some guidelines.

Using Publicis prices as of March 5, Morgan Stanley estimated the value of the package at $172 per Bcom3 share, based on a Publicis price of 33.55 euros (about $30) per share.

The investment bank cautioned that the estimate was not an appraisal of the deal. Publicis closed at 33 euros last Friday, and ranged from 15.8 euros (about $14.4) to 39.9 euros (about $36.3) during the past year.

Based on Morgan Stanley’s estimate, the aggregate value of the deal to shareholders is $2.6 billion, based on the company’s roughly 15.3 million outstanding shares of Class A common stock. That amount will be divided among the com pany’s 660 shareholders.

To prevent a flood on the market, the securities will become available to shareholders over a two-year period. The equity-linked securities and warrants will vest over a four-year period.

In addition to the 660 shareholders, Bcom3 has approximately 1,200 stock-option holders. On completion of the deal, the option holders will receive cash for their options, based on Publicis’ post-merger share price.

While the deal is expected to be completed this summer, executives set Sept. 7 as an “outside date” after which it can be terminated if it’s held up for any reason other than regulatory approval.

Bcom3 officials declined to com ment on details in the document—an F-4 registration statement filed by Publicis—citing SEC guidelines.

When completed—the acquisition is still subject to shareholder and regulatory approval—the deal will make Publicis the fourth-largest advertising holding com pany in the world, with estimated revenue of $4 billion.

Bcom3 share and option holders will not be required to remain with the company to receive full compensation for their shares. Executives are working to lock in key people with contracts.

The filing provided a glimpse into the thought process behind the deal, including Dentsu’s negotiations for full ownership of Bcom3.

According to the filing, Bcom3 executives talked to several holding companies about a potential acquisition or merger, signing a nondisclosure agreement with one of them sometime during the summer or fall of 2001.

The Dentsu negotiations fell apart in early fall, as the Japanese agency focused on its own IPO. Negotiations with the undisclosed company never progressed “be yond the preliminary stage, and no proposals were made” by the time Publicis CEO Maurice Lévy ap proached his Bcom3 counterpart, Roger Haupt, in October, according to the document. The Publicis deal was finalized on March 7.

As part of the deal, Publicis agreed to close the Japanese offices of Saatchi & Saatchi, Zenith and Publicis within 18 months of the deal’s close.

It’s possible those agencies will be folded into Beacon, which was created in June 2000 through the merger of the Japanese offices of Bcom3 properties D’Arcy Masius Benton & Bowles and Leo Burnett.

Publicis has agreed to “partner exclusively” with Dentsu in Japan. Dentsu has the right to request Publicis agencies to “represent Dentsu and its clients” in the Americas, Europe, Australia and New Zealand, provided there are no conflicts, according to the filing.