WPP prepares to pounce on Grey

It’s July again. Time, surely, you may have been thinking as news filtered through of the Grey Global auction, for another episode of the Maurice and Martin show.

Sadly, on this occasion, the usual verbal fisticuffs – not to mention dubious last-minute intervention by exotic, chess-loving strawberry blondes – is off the programme. And all because one of the protagonists has decided not to play any more.

Publicis Groupe chairman Maurice Levy’s sudden withdrawal from the contest for Grey has been as unequivocal as it is mysterious. An ‘exclusive’ interview with French newspaper Le Figaro spells out what was not his reason – lack of financial resources – but he is more coy about the positive motives for withdrawing. He says his longstanding ambition to own Grey has waned since his acquisition of BCom3 in 2002. If that were true, why get involved in the Grey auction at all? It simply does not figure, given that a successful outcome might have rewarded Levy with precisely what eluded him in last year’s tussle with Sir Martin Sorrell over Cordiant: the impetus to be the world’s number three marketing services group.

Yet his BCom3 reference, amplified by several mentions of the primacy of client interest, does provide a hint. It seems this acquisition would have been a case of global integration taken too far for Procter & Gamble, a core client of Grey and, since BCom3, of Publicis too.

Ostensibly that would leave WPP Group as the only big player in the Grey endgame. This is unlikely to have been Grey supremo Ed Meyer’s intention when he put his group up for sale. After all, he is already on good terms with most of the likely suitors. Why employ expensive investment banks such as Goldman Sachs to do what he might better achieve himself?

The Hollinger story could provide a clue. The intention may have been to tease private equity buyers out of the woodwork, forcing trade buyers to bid top dollar in the auction. Although it is hard to visualise private equity buyers running the show on their own, they could team up with an agency network – Havas, desperate to make up global ground, is said to be interested. Or they could retain the services of the 78-year-old veteran himself – he has made it clear he will not be writing himself out of the Grey script any time soon.

Even so, WPP remains odds-on winner; the fact that the market sharply marked down Grey’s share price on digesting the news from Publicis might seem to prove the point.

If WPP were to walk away with the last big acquisition prize in about six weeks’ time, it would certainly have achieved more than a footnote in advertising history by persuading P&G and Unilever to cohabit big time. But there are other issues. How can WPP squeeze more out of Grey’s lamentably low margins without upsetting morale? And how would Sorrell react to Meyer’s stringent personal requirements? Such issues may still cause a deal to fall apart.

The trouble is that although WPP can walk away, Grey will find it a lot harder to pretend it never hoisted the ‘For sale’ sign. In any case, in about 18 months’ time, Meyer will lose his majority voting rights. It’s now or never for Grey.

Stuart Smith, Editor

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