Fulfilling a prediction made by Marketing Services Financial Intelligence as long ago as January 2009, chairman John Napier is now completing the break up of Aegis Group as an independent public company by selling the remains of the group to the major Japanese marketing company Dentsu (see Napier’s game plan for Aegis becomes clearer).
Last year Aegis sold the Synovate research subsidiary to Ipsos for £525 million (see Aegis agrees £525m sale of Synovate).
Dentsu is offering to pay almost £3.2 billion in cash, or 240p per share, being a premium of 45% over the average Aegis share price during the last three months.
Aegis made a profit of £147.8 million before interest and tax in 2011 (see Aegis sales and margins up after dumping Synovate) or £160.8 million after stripping out non-recurring and similar items. So on the face of it Dentsu will be paying a generous multiple of nearly 19 times that figure in a bold move to become a truly global player after several previous smaller excursions into the western world have failed to generate the footprint or the profit it must desire (see Dentsu’s Defensive Debut). Aegis says that the “underlying” operating profit in 2011 was nearer £0.2 billion, but this figure excludes any amortisation charge.
As a multiple of maintainable profit after interest on net debt and tax, the purchase price looks even more generous at about 26.6.
Earlier this year Dentsu freed itself from its ties with Publicis that would almost certainly have stood in the way of any deal with Aegis (see Publicis and Dentsu part company and our 2002 Special Report Publicis Push for Power). Dentsu also extended the US creative agency McGarry Bowen brand to spearhead its European expansion (see McGarry Bowen brand to spearhead Dentsu’s European expansion).
Having been brought in to satisfy Aegis shareholders’ desire for better value from their investment, Napier may now feel that he has fulfilled their best hopes. But in doing so another big British marketing group is falling into foreign hands.
See also Bolloré to make €450 million gain from Aegis sale and our comprehensive Special Report Dentsu’s Defensive Debut that describes Dentsu’s history and the challenges it faced when floated on the Japanese stockmarket in 2001.
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