IPG shareholders reject proposal to sell assets

Debts of $2.3 billion led some shareholders to demand that IPG sell off networks.

Holding company chiefs and venture capitalists hoping to acquire network assets from Interpublic Group have been dealt a blow this week with news that IPG shareholders have voted against putting the company's assets up for sale.

Some shareholders in the troubled holding company had been calling for a sale of IPG's assets in a bid to reduce its substantial debt, which stands at $2.3 billion.

IPG, which owns networks including Initiative, McCann Erickson, Lowe and FCB, will now have to work hard to stem the flow of significant business losses from its main networks and concentrate on winning major accounts to replace those it has lost.

The proposal to sell was eventually rejected by 87 per cent of the shareholders, with 3 per cent voting in favour of the resolution. The remaining 10 per cent abstained.

However, Ken Steiner, who owns 1,000 shares in the business, berated IPG's management for loss of shareholder value, management turmoil, mis-stated earnings and major business losses.

In May this year, the holding company lost the £1.7 billion US media business for General Motors, the second-biggest advertiser in the country, to Publicis Groupe's Starcom MediaVest. This was followed by Universal McCann's loss of L'Oreal's estimated £1 billion pan-European media to ZenithOptimedia in July.

These losses were blamed for the company's depressing performance in its third-quarter results, released last week. They saw organic revenue decline by 2.6 per cent and an operating loss of £55 million.

The vote was taken after the activist shareholder Charles Miller submitted a proposal earlier in the year to sell the communications network. IPG's most valuable asset is McCann Worldgroup, which includes Universal McCann and MRM Communications. It is valued at about $3.5 billion. Initiative and Lowe are each valued at about $300 million, while FCB could have held a price tag in the region of $400 million.

IPG'S 2005 March: Fails to meet deadline for 2004 results May: The £1.7 billion General Motors media business moves to Publicis July: The estimated £1 billion L'Oreal media business moves into ZenithOptimedia September: Shareholder Charles Miller proposes that the company be separated and sold off September: Restates earnings from 2001. Bid to improve transparency leads to agencies refunding clients savings from bulk deals November: Releases third-quarter figures showing losses of £55 million