The recent Interpublic share buying spree has got everyone guessing, writes Bob Willott.
Last Friday approximately 40 million shares in Interpublic changed hands at an estimated cost of about $400m.
Was that share buying spree the first step in a plan by a deep pocketed competitor to take over the US advertising conglomerate?
Or was it merely a protective move by a competitor wanting to obstruct any deal that may have been rumoured to be in the pipeline?
Interpublic has just under 440 million shares in issue and so almost 10% of its shares were bought by one or more parties last Friday.
This morning Interpublic’s shares are being traded at $11 per share (up from around $10 on Friday) so that means Interpublic is being valued on the New York stock market at just under $5 billion.
Ignoring what rationale lay behind the investment, who had $400m to invest?
Most of the other big four could raise that sort of money fairly easily. In the case of Havas, it could simply use the $550m proceeds of its Aegis share sale and still have sufficient change to buy the whole of Creston if that is also its aim.
But how much more will be needed if the buyer has ambitions to gain control of the US advertising conglomerate?
Assuming a premium will have to be paid to achieve that ambition, it could easily cost another $5 billion.
If payable in cash, that would be a tougher call for Havas, and would probably make a bit of a dent in the Publicis, Omnicom and WPP balance sheets too unless they can raise some more share capital. It would also appear to be beyond the means of companies like Dentsu and Sapient Corporation.
So it seems at least possible that someone is talking to Interpublic about a merger that would involve some form of share exchange rather than an outright cash deal.
If so, that other party may have considered it desirable to put a stake in the ground by acquiring a potentially blocking shareholding before going public with its plans, even if that might push up the eventual purchase price.
Or, as hinted earlier, another competitor may have got wind of a cunning Interpublic plan and decided it would like to pre-empt or prevent it in some way.
Assuming a full-blown merger or takeover is in the offing, rather than one of Vincent Bolloré’s much loved "strategic investments", would Interpublic be worth a purchase price in excess of $5 billion?
If the Facebook share windfall is excluded, Interpublic made a profit before tax of almost $590 million in 2011 - equivalent to roughly $400 million after tax - and looks set to match that in the current year, albeit the group’s performance is always heavily back end loaded towards the final quarter.
That scale of performance, plus the residual value of the balance of the company’s investment in Facebook, should certainly support Interpublic’s current market value.
This story is certainly not over yet.
Bob Willott is editor of Marketing Services Financial Intelligence