IPG Announces Exchange Offer

Last week, the Interpublic Group of Companies, Inc. (IPG - Analyst Report) announced the commencement of an exchange offer to holders of any and all of its $600 million 10.0% senior notes due in 2017, which are subject to transfer restrictions under the Federal securities laws, for an equal amount of new 10.0% senior notes due in 2017, which doesn’t have such transfer restrictions. 

The new notes will be substantially identical to the original notes for which they will be exchanged, except that the new notes will have no transfer restrictions under the Federal securities laws, no rights to additional interest and no registration rights. Original notes that are not exchanged will continue to be subject to transfer restrictions under the Federal securities laws, but will no longer be eligible to receive additional interest or have the benefit of registration rights. 

The exchange offer will expire on Oct 23, 2009, unless extended. Tenders of the original notes must be made and may be withdrawn at any time before the exchange offer expires. 

Recently, the two agencies of the company, Octagon and GolinHarris announced a partnership, creating Octagon PR, a unit focused specifically on sports public relations strategy, ideation and execution. 

The partnership is expected to fill an empty space in the marketplace and help in expanding the communications between the agencies. However, softness in ad spending by auto clients as well as weak trends in the marketing business has hurt IPG’s revenue and earnings in the second quarter of 2009. Revenue dropped 20% to $1.47 billion from $1.84 billion in the year-ago quarter. 

During the quarter the company reported a 76% drop in net profit as the global slump in advertising continued. Net profit was $20.9 million, or 4 cents, compared to $88.1 million, or 17 cents, in the year-ago quarter. 

The company’s balance sheet remains solid. Total debt was reduced to $2.04 billion from $2.12 billion as of Dec 31, 2008. Moreover, management is confident of being able to redeem the 2009 and 2010 maturities with cash in hand. 

We believe that a solid balance sheet combined with improved financial systems and cost discipline should carry the company through the economic turmoil and help in thrive when demand for marketing services pick up as part of a broader recovery.

Read the full analyst report on IPG