It’s not only Publicis Groupe chief executive Maurice Levy who appears to be heading for the exit by 2012. Major shareholder Dentsu – one of the world’s largest ad agencies in its own right – may also be preparing for a strategic withdrawal from the group at about the same time.
That would certainly be one reasonable explanation of why it has just offloaded a large slug of shares.
The shares in question represent nearly 4% of Publicis’s total equity. Pre-sale, Dentsu owned 15% of Publicis, making it the company’s most significant shareholder, on paper. But here’s where politics comes in. Not all Publicis shares are the same: some have double voting rights. Under the old regime, Dentsu theoretically held nearly 17% of voting rights, but placed 2% of these (ie, anything above 15%) in a partnership agreement with Publicis’ other powerful shareholder, Elisabeth Badinter – representing the founding family. This in effect was a double-lock, guaranteeing the family interest – also with 15% voting rights – reigned supreme. On the one hand, two major shareholders, with over 30% voting rights between them, could ward off any predatory interest. On the other, the excess voting shares arrangement meant Badinter had a degree of control over Dentsu should the relationship sour.
So how have things changed? To outward appearances, Dentsu has managed to squeeze €218m out of Publicis at a rather inconvenient time and given back very little in return. Under a prior agreement, it had to offer the 7.5 million shares to Badinter (on a first-refusal basis). There was little choice but to buy and cancel them (unless of course Publicis is looking for another powerful outside stakeholder, which I doubt). And yet Dentsu has hung on to its maximum 15% voting rights, and still retains two members on the Publicis supervisory board.
Is this the first of a series of carefully controlled tranche sales that will eventually result in Dentsu’s exit from the strategic partnership? Quite possibly. It’s easy to see what Publicis has got from the deal over the years (lots of money and a strategic leg-up in the Far East); less so to discern Dentsu’s advantage. For a start, Dentsu management and shareholders must harbour some resentment over the ¥38bn (€320m) writedown on the Publicis stake they had to swallow last year, which helped push the Japanese group into its first loss since 1978. This much is certain: the share sale is another indication that Publicis Groupe is entering an interesting period of flux.