French advertising group Havas is back in the bidding for US ad agency True North, according to a report in this morning’s Financial Times. Havas had been reported to have expressed an interest in the Chicago-based agency a couple of months ago, but no developments emerged in the meantime. UK-based communications network WPP is also thought to have been involved in earlier negotiations, but it is now Havas and US group Interpublic that are believed to be the real contenders to acquire the creative agency.
In August last year True North approached the UK’s Cordiant Communications about a possible merger, but nothing came of this and when True North lost key client DaimlerChrysler shortly afterwards it became a target for takeover itself.
Havas and Interpublic may have to be careful not to pay over the odds for True North in order to protect the value of their own shares. ABN Amro says that the deal would be bad news in the short-term for Havas’ stock. This is mainly due to True North’s reliance on creative activities – almost 70% of revenue – and its focus on the North American market – 72% of revenues. The US is currently experiencing an economic slowdown and it is generally creative advertising that gets cut back first in tight economic conditions. As a result, True North is in a doubly weak position.
When Havas’ interest in True North was first mentioned in January shares dropped by more than 10% in two days. By early afternoon today stock remained unchanged in Paris at €15.5.
