Interpublic Group has reached a settlement with Elliott Management, the activist hedge fund, to reshuffle the advertising company’s board as it seeks to boost its financial performance.
Elliott, which has lifted its holding to 6.9 per cent, has been pushing IPG to maximise shareholder value since the $25bn fund, founded by Paul Singer, first disclosed its stake in July. Elliott and IPG have held regular talks over the past six months, including discussing the possibility of a sale of the entire business to another of the large advertising holding companies including Publicis, Omnicom, WPP, Dentsu or Havas, a person familiar with the matter said.
The agreement announced on Thursday does not rule out a sale down the road, and Elliott continues to believe the advertising industry is ripe for consolidation, this person said.
IPG, which owns McCann, Lowe and Partners and FCB, has been tipped as an acquisition target for years as the sector has become dominated by a small number of large holding groups. Analysts and industry executives expect more dealmaking, despite the breakdown last year of a planned $35bn merger between Omnicom and Publicis. In November, Publicis paid $3.7bn for Sapient, the US consultancy.
Three board nominees were agreed in discussions between IPG and Elliott, with each side proposing names. Two current directors, Jill Considine and Richard Goldstein, will retire on March 1 and the board will expand from nine members to 10.
The new candidates are Jonathan Miller, the former chief executive of AOL and former News Corp chief digital officer, Deborah Ellinger, the former chief executive of the Princeton Review, and Henry Miller, a restructuring expert and chairman of Marblegate Asset Management.
The incoming members will sit on a new five-person finance committee, which will focus on improving IPG’s operating margin to 13 per cent or higher, on par with its peers in the industry. The company has projected a 10.3 per cent margin in 2014. It reports fourth-quarter and full-year results on February 13.
Jesse Cohn, Elliott’s head of US equity activism, said the fund was “pleased with the constructive dialogue we have had with Interpublic” and looked forward to “ongoing collaboration” with the board and management.
Michael Roth, IPG chief executive, said: “We felt it was important to build on our momentum, consolidate our achievements, reaffirm our commitment to further margin enhancement and position the company for continued value creation going forward. By refreshing our board and creating a new finance committee, we can accomplish all four of these key objectives.”
As part of the agreement, Elliott will support all of the board’s nominees at its 2015 annual meeting and has agreed to certain standstill provisions preventing it from mounting a proxy fight or acquiring a stake of more than 9.9 per cent.
IPG shares rose 1.4 per cent to $20.86 by close of trading in New York.
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