Bolloré's bet

BUSINESS
Advertising

Jan 13th 2005 PARIS
From The Economist print edition

A corporate raider targets Havas, a big French advertising agency

IN FRANCE'S clubby business circles Vincent Bolloré is a controversial figure. One-third of the establishment loathes him, one-third does not trust him and another third supports him, claims the boss of one big French company. A business leader's opinion of the country's top corporate raider depends on whether he has been, or could become, a victim of one of Mr Bolloré's raids. Those safe from his adventures admire his sang froid in sniffing out undervalued companies, shaking up management and extracting cash.

Mr Bolloré's latest target is Havas, a big French advertising agency. Last July, Mr Bolloré, on holiday on his boat, telephoned Alain de Pouzilhac, boss of Havas, to tell him that he would buy as much as 5% of the firm's shares, which he considered undervalued by the stockmarket. Mr de Pouzilhac welcomed this plan. Havas was trying to recover from one of the worst years in its history; interest from a well-known investor seemed to be good news.

But Mr de Pouzilhac soon grew suspicious of Mr Bolloré's true intentions, after Mr Bolloré confused him with contradictory statements about his investment in Havas. The turning point was last year's long bidding battle for Grey Global, a big American ad firm. Mr de Pouzilhac pulled out all the stops to acquire Grey, which would have strengthened Havas, then a weak number six in a consolidating global industry. When he tried to discuss a bid for Grey last September, his biggest shareholder seemed not to be interested. Yet a few days later Mr Bolloré leaked to the press that he opposed a takeover of Grey. In the end Britain's WPP, the world's largest advertising group, snapped up Grey.

Since then Mr de Pouzilhac and Mr Bolloré have not been on speaking terms. Mr Bolloré has gradually acquired 20% of Havas. Mr de Pouzilhac, in turn, has written several letters asking Mr Bolloré to explain his intentions, but got no reply. They are now fighting via the press. Through press interviews Mr de Pouzilhac has learned that Mr Bolloré wants two seats on the board of Havas, thinks Havas should adopt a two-tier board structure and plans to impose Pierre Dauzier, an ex-boss of Havas, as head of a new supervisory board.

Mr Bolloré says he is building a media holding company around Havas. Last month he pooled his Havas shares, hitherto split among four subsidiaries, in Bolloré Médias Investissements, a new entity. He also used two-thirds of his Havas stake to raise a five-year €200m ($270m) loan from Société Générale, hinting that the money might buy more Havas shares.

Yet his record as a corporate raider suggests that he may not become a strategic long-term investor. His €5 billion conglomerate is a mix of businesses ranging from shipping and commodities to cigarette paper. Media fits in awkwardly. Moreover, he is said to need the €200m loan to buy out investors in his group.

Perhaps Mr Bolloré is acting on behalf of France's Publicis, the world's fourth-biggest ad agency. Maurice Lévy, boss of Publicis, is close to Alain Minc, a consultant who is now advising Mr Bolloré. However, clients rarely want their ad firm to work for their main rival, and Havas looks after Peugeot and Danone while Publicis works for Renault and Nestlé. Mr de Pouzilhac estimates that some €500m in revenue would disappear were Havas and Publicis to merge. Also, Publicis is still digesting its acquisition of Bcom3, an American agency—and Havas is a big company to swallow.

Mr Bolloré may have hoped to orchestrate a bidding war between WPP and Publicis. But WPP does not seem interested. So if Publicis also proves unwilling to buy Havas, Mr Bolloré may face a tough choice. He could try to buy the entire company and install his men at the top. But advertising is a people business and many talented people might jump ship along with Mr de Pouzilhac—and, probably, at least some clients. Alternatively, he could quietly sell off his stake. Although Havas shares jumped when he started to buy them, they are now at around the price he paid. Selling without a profit might be something of a blemish on his record as a raider.

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