WPP Group PLC, a British marketing firm, yesterday offered $434.6 million to buy JWT Group Inc., one of the world's largest advertising and public relations companies.
JWT Group is the parent company of J. Walter Thompson Co., the fourth-largest advertising agency in the world, and Hill and Knowlton Inc., which last year acquired Washington's Gray & Co. Public Communications International Inc.
Advertising officials characterized the offer of $45 a share in cash for JWT Group as the first unfriendly takeover attempt in the advertising industry, where conventional wisdom has maintained that clients upset by such a takeover would take their business to other agencies.
A spokesman for JWT Group yesterday said only that the company would examine the unsolicited offer with its financial advisers to determine "what is best for our shareholders, employes and clients."
The offer comes on the heels of months of turmoil within JWT, particularly for its advertising subsidiary, where five top executives have recently been fired or resigned.
Joseph O'Donnell, J. Walter Thompson's chairman and CEO, was fired in January by Don Johnston, chairman and CEO of JWT Group, for "having unauthorized discussions with outside investors relative to taking over the company," according to a JWT Group spokesman. Johnston then added O'Donnell's title to his own.
John E. Peters, president of J. Walter Thompson, also was fired shortly after O'Donnell.
JWT has also had problems with its clients recently. Burger King, one of the company's largest clients has solicited proposals from other agencies for its advertising. And JWT closed its 75-person Washington office, the second-largest advertising office in the area, late last year after losing the accounts of the Federal National Mortgage Association and USAir. The two accounts -- totaling $16 million in businesswent to the Bethesda-based Earle Palmer Brown Cos.
Hill and Knowlton maintains a 140-person office at Washington Harbor with former Gray & Co. founder Robert Gray as chairman. No one from that office would comment yesterday on the possible takeover or on Wall Street speculation that WPP might sell Hill and Knowlton if its offer is accepted.
In spite of its problems, JWT has continued to be one of the most respected agencies in the advertising business, according to industry officials, and has won numerous creative awards for such clients as Miller Beer, Ford Motor Co., Kraft and others.
"They have a tremendously loyal client list," said Greg M. Ostroff, an analyst with Goldman, Sachs & Co. "They're a great company with financial problems," he said, citing the company's losses of more than $6 million in the past two quarters.
Analysts generally said they did not think that this unsolicited offer is a sign that the megamergers of last year among advertising agencies would start up again. Many of those mergers created unhappiness among clients, and analysts said that the recent turmoil at JWT made it a more likely takeover candidate.
In a letter from Martin S. Sorrell, chairman of WPP, to Johnston, Sorrell cited "the recent difficulties within JWT" and said that "continued uncertainty about the business and direction of JWT cannot be in the best interests of JWT's clients, employes or shareholders."
WPP, which wants an answer from JWT by 4 p.m. today, already has arranged to bring back Peters, who was with JWT for more than 30 years, in a senior management capacity. Peters could "restore order to a great company," said a spokesman for WPP. Asked what Johnston's position would be if the proposed merger took place, he replied: "I assume there's room for negotiation on Johnston."
Though JWT Group spokesmen would say only that they would consider WPP's offer and other alternatives, JWT's most recent annual report decried the spree of megamergers in the industry.
The company "has no intention of participating in this mating of giants," the report continued. "It doesn't need to."
While some in the industry clearly saw the takeover offer as hostile, others urged caution in using the term. "I think it makes a great deal of economic sense," said Alan J. Gottesman at L.F. Rothschild, Unterberg, Towbin Inc., who preferred to call the offer unsolicited. "The offer is not unfriendly to the shareholders, and trying to fix the company is not unfriendly to the employes or clients."
JWT Group's revenue last year was $649 million. JWT was the fifth-most-active stock on the New York Stock Exchange yesterday with a volume of 2.5 million shares. The stock closed at $49, up $9.75.
WPP Group's British businesses include incentive and motivation consulting, graphics and design and audio-visual businesses. The company, which is listed on the London Stock Exchange and had sales last year of $37.9 million, is a much smaller company than the one it seeks to take over.
However, its revenue for the current year should be about $130 million, according to a company spokesman, following a takeover spree by Sorrell.