Investors in ad groups have not had much to cheer about of late – except, that is, former shareholders in Saatchi & Saatchi, who are set to receive a £122 million ($177m; €198m) cash payout from Publicis Groupe.
The windfall – compensation for a decline in the value of Publicis stock – comes eighteen months after the French ad giant completed the €1.9 billion all-stock acquisition of UK-headquartered Saatchi in September 2000.
In order to prevent former Saatchi shareholders selling their new Publicis equity en masse, thereby driving its price down, the French group attached a CVR (contingent value right) to the stock, promising to compensate for any fall in its value of up to 10% after eighteen months.
One ad recession later, Publicis stock stands around 28% lower than it did at the time of the acquisition, forcing the full 10% payment. In addition, extra CVRs have been circulated as Saatchi’s stock options have matured, pushing the total value of the purchase up by around 11%.
Once bitten, twice shy, Publicis adopted a very different strategy with last week’s with Bcom3 Group deal. Only half of this purchase will be in stock, around 50% of which will go to Dentsu, which cannot sell it for a decade. The remaining shares related to the deal will be given to Bcom3 employees who, similarly, cannot offload them for six months – and then only at a rate of 25% every half-year.
Data sourced from: Financial Times; additional content by WARC staff