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May 26, 2010
Share ThisThe Interpublic Group of Companies, Inc. (IPG) has decided to buy back its 0.37 million preferred shares for $321.8 million or $869.86 per share. In addition to this, holders will also be eligible for accrued and unpaid dividends before the expiration date on May 26, 2010.
The buyback was announced prior to the first quarter 2010 release on the basis of excess cash with the company. At the end of fiscal 2009, Interpublic Group was at a net cash position of $560 million. However, at the end of the first quarter of 2010, net cash position was nil.
We are optimistic on the company’s various strategic investments with its focus on emerging markets. In 2007, the company made investments in India and Brazil , further strengthening its presence in high-growth, developing markets.
In 2008, IPG built on this strategy and completed an important transaction that increased its stake in the Middle East Communication Networks (MCN). The company’s partner in Russia is the acknowledged advertising leader in that country. In China , the company operates with all of its global networks and across the full spectrum of marketing services.
However, the company depends on a few significant customers for a large proportion of its revenues, which would substantially affect its business. The company’s top ten clients accounted for almost 24% of total revenues in 2008 and 2009.
Interpublic Group is exposed to exchange rate fluctuations, as approximately 45% of its total revenue is generated from international operations. Yet, the company’s cost containment initiative should help it thrive as demand for marketing services gradually picks up in a broader recovery. We reiterate our Neutral recommendation until economic stability.
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