The directors of the company that owns the embattled J. Walter Thompson ad agency met in New York for several hours on Tuesday to review a sweetened takeover offer from a fast-growing British marketing services firm.
The JWT Group board was said to be reviewing other options, including a management buyout, in a meeting that continued into the evening. An announcement was expected today.
At issue is an offer by London-based WPP Group to pay $50.50 a share for JWT Group, provided a merger deal was reached by today. WPP has threatened to launch a fight to replace the company's 11-member board with six directors chosen by WPP if there's no merger agreement.
The price of JWT shares continued to rise on Tuesday, indicating that arbitrageurs, or professional stock speculators, expected the advertising firm to hold out for a higher offer. JWT shares closed at $52.50 a share, up 50 cents in New York Stock Exchange composite trading.
Wall Street sources estimated that arbitrageurs now hold close to 40% of JWT shares. The WPP Group owns nearly 5%. It has lined up enough financing to pay $53 a share.
Investment analysts who follow the advertising industry have said they expected JWT to hold out for a slightly higher price from WPP, viewed by most analysts as the only likely buyer. "My scenario was that JWT will say the offer isn't quite enough and WPP will throw in a one or two more dollars," said James D. Dougherty, an analyst with County Securities USA in New York.
WPP, the second-largest sales promotion firm in Britain, is about one-fifth the size of JWT, the parent of one of the nation's oldest and most prestigious ad agencies. The British company has said it wants to buy JWT, also the parent of the Hill & Knowlton public relations firm, to expand its presence in advertising and public relations worldwide.
JWT's clients include some of the nation's biggest industrial companies, including Kellogg, Kraft and International Business Machines. However, three of its big clients, Goodyear, Eastman Kodak and Ford, have said they might take their business elsewhere if JWT changes hands.
JWT has been viewed as a takeover target since January, when several of its top executives were let go after Joseph O'Donnell, head of its flagship J. Walter Thompson ad agency, presented its board with a buyout proposal from an outside group that would have unseated Chairman and Chief Executive Don Johnston. O'Donnell, now chairman of the William Esty ad agency, wasn't part of the WPP effort.
But WPP had been talking about jobs with other former JWT executives. Jack E. Peters has agreed to rejoin the firm as president and chief operating officer, the position he held until he was let go in January.
The acquisition of JWT is by far the biggest attempted by fast-growing WPP. Until two years ago, the firm was a maker of shopping carts and was known as Wire & Plastic Products. Under Martin S. Sorrell, the former finance director for the British ad agency Saatchi & Saatchi, the firm has grown into a marketing services company through acquisitions.
Sorrell, 42, recognized as an astute financial executive while with Saatchi & Saatchi, helped engineer the acquisition strategy at that firm that rapidly transformed it into the world's biggest ad agency.
The takeover drama for JWT began a week ago, when WPP made a friendly $45-a-share offer. The offer turned hostile when JWT responded that it would consider WPP's bid along with "other options" that were thought to include a merger with an entertainment firm, such as Los Angeles-based MCA, or a management buyout.
Two days after launching the tender offer at $45 a share, WPP offered to raise the ante to $50.50, provided a quick agreement was reached. WPP is also suing JWT in Delaware Chancery Court to throw out its "fair price" amendment that prevents two-tier buyouts and could affect WPP's offer.