The World: Havas battles on as Breton buccaneer hovers

The chairman, Alain de Pouzilhac, is bullish, but what about the corporate raider lurking in the wings?

The Havas headquarters looks serene. A giant, angular structure in red brick and glass, it rides above the Seine like a liner. When the group moved into its flagship offices in April 2003, its chairman, Alain de Pouzilhac, told reporters: "I'm convinced we're going to shine in this environment."

In fact, the group's fortunes since taking up residence in the building have been mixed, to say the least. Havas has ploughed its way through a depressed market, a complex restructuring and the loss of major accounts. The year of the move was particularly tempestuous. De Pouzilhac admits: "Our performance in 2003 was poor, both by our own standards and those of our competitors. But it was understandable, given the state of the market, which was exacerbated by the changing attitudes of consumers, who are turning away from traditional media."

And now there is the looming presence of the French corporate raider Vincent Bollore - the "Breton buccaneer" - who has amassed a 22 per cent stake in Havas. It's unclear whether he wants to take control of the company as part of a nascent media empire, or sell at a profit. Whichever, the uncertainty seems to have stalled a potential media buying alliance with Interpublic's Initiative.

Havas views its recent results as good news, although the muted market response must have dulled the shine. The group announced a rise in revenue of 2 per cent in 2004, to 1,494 million euros. It said new business had risen 59 per cent to 1.5 billion euros. In France, its second-largest market after North America, revenues rose 6.6 per cent to 269 million euros. De Pouzilhac also points to organic growth of more than 4 per cent in the fourth quarter of 2004.

"What you're seeing is a direct result of the strategy we put into place between September and December 2003, when we adopted a business model that is very different from those of our competitors."

The plan revamped the company into an integrated marketing organisation around the central pole of Euro RSCG Worldwide. Units that previously fell under the group's now-defunct "Diversified Agencies" umbrella were merged into Euro RSCG.

The group's second advertising agency, Arnold, was positioned as a "creative alternative" to the larger network.

De Pouzilhac says the results vindicate this strategy. Bollore may well be a financial genius - but you don't have to be one to get the message.

Bollore has gone quiet for the moment, but is expected to weigh in at the group's next general meeting in May, where he is likely to demand a greater say in the way Havas is run. Does De Pouzilhac fear a putsch? "I'm not fighting a personal battle with Bollore. I am respectful of our shareholders. But it's fair to say that I dislike the idea that somebody might try to take control of the group without paying the correct price," he says.

He adds that, in common with the press, he does not know whether Bollore is a long-term investor or a corporate raider. "I sent him a letter on 14 December asking his intentions, but I've yet to receive a reply."

The KBC Securities analyst Jacques Falzon describes Bollore's silence as "bothersome". "We've heard a lot about this media buying partnership with Interpublic, which we would regard as a very positive step. But, apparently, Interpublic is unwilling to go ahead with the deal until the largest shareholder of Havas firmly declares his intentions."

De Pouzilhac declines to confirm or deny any discussions with Interpublic, but says: "For strategy and planning, we are perfectly well-served with MPG. In terms of buying, we are exploring the possibility of partnerships in markets where we lack volume. But the project has been postponed until after the general meeting."

An insider at Interpublic says the speculation is "out of proportion" with reality. The story goes that Air France debated handing its media business to Interpublic's media buying arm, Initiative. But MPG retained the account by promising an expanded service in the form of an alliance with another agency.

"The agencies would remain entirely separate, but they would sign a partnership agreement," the source explains. "It would be unprecedented, but it would be a good move for both groups, as it would strengthen their offering. For now, though, the deal has gone cold."

This is not the only issue that worries analysts. Havas recently lost two major accounts: the $450 million Volkswagen media account, which switched from MPG to MediaCom; and Intel's creative work, said to be worth $300 million, for which Euro RSCG announced in January that it would not be re-pitching.

There are also disquieting rumours that WPP is waiting to make a move on Havas.

But don't the recent results offer reassurance? Falzon notes: "The results look healthy because they started from a low base. The important figure is the organic growth of 2 per cent. The company did well in terms of new business in 2004, but it also lost key accounts. I think it's too early to be more than cautiously optimistic. Let's wait and see what happens in 2005."

HAVAS' WOES

September 2004: Vincent Bollore ups his stake in Havas to 10.4 per cent, in the process taking a stand against Havas' decision to bid for Grey Global Group. Havas fails in its attempt to buy Grey, and the network is won by WPP.

October 2004: Bollore's stake increases again, to 15.4 per cent and then 22 per cent. Speculation that Havas is in line for a takeover by Publicis Groupe or WPP is scotched by Publicis.

December 2004: Alain de Pouzilhac sends Bollore a letter asking the raider to declare his intentions for Havas. He does not receive a reply.

January 2005: Havas pulls out of the $300 million Intel advertising and media review.

February 2005: Volkswagen moves its $450 million media account from the Media Planning Group to MediaCom. Havas' results, including a 2 per cent rise in revenue, fail to impress analysts.

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