True North Communications in Chicago, stunned by the loss to Omicom of its largest client, Chrysler Group [WAMN: 6-Nov-00], yesterday outlined a number of steps to counter the financial loss and possible hostile takeover.
Speaking to analysts and reporters, True North executives insisted they had ruled nothing out to compensate for the loss of Chrysler’s estimated $140 million in annual revenues. Among the options are the seizure of another major auto client, employee lay-offs, and “strategic possibilities” such as a sale or merger.
Said True North chairman and chief executive David Bell: "We are fully committed to building the brands in our portfolio, our clients and our shareholders." Bell continued: “This has always been a management team that has looked to our future, not our past. Our focus will be on forging ahead."
Meanwhile analysts picked over the bones: "While we believe the financial impact of the loss has been at least partly factored into the stock price, we do not think the valuation is compelling enough to make investors want to own a company that will show little to no organic growth in 2001," said David McMurry of Credit Suisse First Boston.
"The loss of the account makes True North a much more likely acquisition candidate," opined McMurry, “because it eliminates any possible conflict with an agency that handles an automotive account; but we do not believe the company is in a rush to sell and do not anticipate a quick run-up on merger speculation."
Chrysler's exit, which will be phased over the next three to six months, will see the progressive transfer of its advertising – including the Jeep, Chrysler and Dodge marques – to Omicom’s BBDO Worldwide New York unit.
As True North’s largest shareholder, Maurice Lévy, chairman and chief executive of Paris-based Publicis Groupe, observed, Chrysler’s decision “makes True North an attractive takeover target for the major industry players". He declined to say whether Publicis is among them.
News source: New York Times