Lurking within financial documents filed Thursday by Omnicom Group was news that the faltering firm shelled out a cool $106.2 million (€99.03m; £67.98m) in shares and assumed debt to buy back interactive shop Organic from Seneca Investments.
The filing with the Securities and Exchange Commission revealed that the agency holding company, number three in the world rankings, swapped $99 million of its preferred stock in Seneca (a shell company jointly owned with private equity firm Pegasus Capital LLP) plus liability for Organic’s $7.2 million debt.
Seneca was formed in 2001 as a holding company into which Omnicom funnelled its sixteen online agencies, most if not all of which were losing money. Although news of the Organic buyback leaked out exactly two months ago [WAMN: 28-Jan-03] silence reigned until now over the dollars involved.
The relationship between Omnicom and Seneca has been controversial to say the least, the Wall Street Journal speculating that it might be a device to protect Omnicom’s balance sheet by avoiding the writeoff of losses in its internet investments.
The allegation was refuted by Omnicom's management and subsequently cleared by auditor KPMG which reviewed the deal and recommended no changes.
The SEC filing also revealed that Omnicom’s acquisitions in 2002 totalled $680.1m, down from $844.7m the previous year. The former sum includes $324.8m in earn-out payments from acquisitions made in previous years.
Data sourced from: AdAge.com; additional content by WARC staff