Young & Rubicam’s flotation on the New York Stock Exchange last
week was met with a near universal thumbs-up from financial analysts and
traders alike. Scheduled to go on at between dollars 21 and dollars 24 a
share, the price had already risen to dollars 25 by the time the float
began and had soared to dollars 28 by the close of the first day
(Monday, 11 May).
In all, 16.6 million Y&R shares changed hands on that day, representing
around 25 per cent of the company’s stock and raising somewhere between
dollars 400 million and dollars 450 million.
However, only 6.67 million shares were actually sold by Y&R; the rest
were disposed of by stockholders. The net proceeds to Y&R, therefore,
are estimated at about dollars 175 million - certainly not a bad
The money will be used to pay down debt, putting Y&R in a position that
will enable it to go on a fairly major shopping spree over the next six
to 12 months as it bids to keep up with the Joneses or, in this case,
the Omnicoms, WPPs and Interpublics.
On the face of it, Y&R, the fifth biggest advertising group in the world
(Japan’s Dentsu is the number four), will need to spend thick and fast
to maintain its place at the top table.
While Omnicom and WPP, most notably, have been busy buying hi-tech
companies and marshalling their global media forces, Y&R’s impending
flotation undoubtedly provided something of a distraction. So we can
expect to see a series of acquisitions in both the new-media and
database marketing fields and cannot rule out the takeover of a
traditional media buying network.
It is not these issues, however, but the absence of a second advertising
network - compared with WPP’s two and Interpublic’s and Omnicom’s three
a piece - that most observers point to as the biggest obstacle to Y&R’s
growth. How odd then that Peter Georgescu, the Y&R chairman, told
investors quite explicitly at the pre-flotation roadshows that the
acquisition of a second network was not an option. To which the most
apposite response must surely be: ’For how long?’.