Interpublic CEO Has 20 Million Reasons to Sell Right Now

Last Updated Sep 16, 2011 1:28 PM EDT

Ad agency network Interpublic's (IPG) stock has a reached a new low -- $7.93 at the time of writing -- prompting a scathing article in Adweek that suggests CEO Michael Roth will be forced to quit. It's entertaining stuff, except for one thing: The story has not a single source from inside IPG confirming it, just a bunch of speculation from Wall Street analysts and former execs who could be anybody.

If Roth leaves IPG, it will be unlikely because he is fired. Roth is both CEO and chairman of the board, making him extremely difficult to get rid of if he doesn't want to go. Rather, speculation about the future of IPG ought to focus more Roth's severance package in the event IPG is bought by another company: He could get a $20.7 million golden parachute, according to SEC disclosures.

IPG stock is likely to stay low for a while, since IPG unit DraftFCB lost the S.C. Johnson account and McCann Erickson appears to be treading water. The good news for Roth is that this makes IPG cheap: Earlier this year it was at $13.20, just shy of the $13.65 high it reached prior to the credit collapse in 2008.

IPG owns some great agency brands, such as Deutsch, Gotham, Hill Holliday, Lowe & Partners and, perhaps the jewel in the crown, digital agency R/GA. There is also the Magna Global/Universal McCann media business, and the Orion prop trading group. (Not to mention that IPG has found a way to legally keep up to $100 million a year in media credits and discounts that it is largely illegal for other agencies to keep.) Most deliciously of all, the acquirer would get a 0.2 percent stake in Facebook, currently worth about $133 million all on its own.

Hostile bid possible
These are not unattractive assets, and acquirers can now snap them up at an almost 50 percent discount to IPG's historic trading price. With no catalyst on the horizon to give IPG's shares a lift in the future, it may even be worth tendering a hostile bid for the company.

Who might launch such a bid? The traditional suspect is Publicis (PUB), owner of Saatchi & Saatchi and Leo Burnett. The Publicis-Interpublic rumor surfaces roughly once a year. Here is an example from 2006; it cropped up again in January and then November of 2010.

The financial stars are aligned: A sale would give Roth a big bang to go out on, he could deliver his depressed shareholders a premium on their stock and walk away a very rich man.

In fact, Roth's compensation incentives are aligned largely in favor of selling the company. He gets $20.7 million if the company is merely sold, $15.7 million if the sale leads to his exit (as it likely would) but only $4.5 million for simply retiring.

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