2023-12-14 15:05:31
Published on Dec 14 2023 at 4:05 p.m.
Havas on the Stock Exchange, season 2. Almost six years to the day following its withdrawal from the stock market and its absorption by Vivendi, the entertainment group controlled by the Bolloré family has announced that it intends to reintroduce – within twelve to ten – eight months -, on the markets its and communication group. An announcement coming as part of a larger plan aimed at splitting Vivendi into several independent entities.
This operation will potentially allow Havas – whose enterprise value is estimated between 2.5 and 2.8 billion euros according to several analysts – to carry out buybacks by paying for external growth operations in securities, rather than ‘in cash. “The problem with Havas is the size and the financial means to change it. To become the equal of WPP and Publicis and evolve in the post-modern and very “tech” world of large agencies, the group will have to strengthen itself,” explains analyst Jean-Michel Salvador at AlphaValue.
In recent months, Havas has re-intensified its external growth. This summer, the group acquired the majority of the capital of the creative agency Uncommon, for several tens of millions of euros. But these transactions are similar to targeted buyouts and not large-scale operations as Publicis was able to do (8.1 billion dollars in total to acquire Sapient and Epsilon) IPG (2.3 billion for Acxiom), Dentsu (1.5 billion for Merkle) or recently Omnicom (835 million for Flywheel Digital).
No significant acquisition
It remains to be seen what the Bolloré family’s intentions will be in this matter. “The big question mark that remains is what Havas’ profile will be and if we give it the means to change scale. The geometry of the distribution of debt between Vivendi entities will be a real indication, notes Christophe Cherblanc, head of equity research in the media sector at Société Générale CIB. Afterwards, Havas can also continue its journey in this way. The group generates more than 200 million in free cash flow per year, which is enough to pay dividends and pursue targeted acquisitions.”
A major player in France and increasingly in the United Kingdom, Havas is a bit of a special case internationally, boxing in the category well above the S4 and other M & C Saatchi, but evolving a notch below heavyweights: IPG, WPP, Omnicom, Dentsu and Publicis. In terms of revenue, Havas only represents a little more than 20% of the latter – the leading market capitalization in the sector with a historic peak these days at more than 20 billion euros -, with a turnover which should be around 2.8 billion for the 2023 financial year. A record for Havas.
“The most likely scenario for Havas is to be acquired”
“Havas generates 35% of its revenues in the United States, compared to nearly 60% for the Anglo-Saxon giants and Publicis. However, this size effect, and to a lesser extent their product mix, weighs on their operating margin which amounts to a little more than 11% compared to a range of 15% to 18% for WPP, IPG, Omnicom, and Publicis”, dissects Christophe Cherblanc.
But between the path of stability and that of a real change of scale, the field of possibilities is also open. “The Bolloré family may try to rely on a more consistent player and/or decide to retain only a minority share in Havas. What they have already done with other assets,” notes Jean-Michel Salvador. The JPMorgan bank is on a similar line: “The most likely scenario for Havas is to be acquired, as part of the consolidation of the industry, within two to two and a half years.”
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