NEWS
MORGAN STANLEY DEAN WITTER
17 July, 1998
Not for release, publication or distribution in or into Canada,
Japan or Australia.
THE INTERPUBLIC GROUP OF COMPANIES, INC.
("Interpublic")
Recommended proposal for the acquisition of
INTERNATIONAL PUBLIC RELATIONS PLC
("IPR")
and
Interim Results of IPR for the six months ended 30 April, 1998
1. INTRODUCTION
Boards of IPR and Interpublic jointly announce that they have
reached an agreement on the terms of a proposed acquisition by
Interpublic of IPR to be effected by means of a Scheme of
arrangement to be proposed by IPR under section 425 of the
Companies Act 1985. As consideration under the Scheme, IPR
Shareholders will receive shares in Interpublic, a New York Stock
Exchange listed company headquartered in the U.S. Interpublic is
one of the largest organisations of advertising and marketing
communications companies in the world.
2 TERMS OF ACQUISITION
Under the Scheme, Interpublic will issue new Interpublic Shares
to IPR Shareholders on the following basis:
for every 100 IPR Shares 1.845 new Interpublic Shares
and so in proportion for any other number of IPR Shares held.
Interpublic shares to be issued as consideration under the Scheme
will be issued fully paid, free from all liens, equities,
charges, encumbrances, rights of pre-emption and other third
party interests and together with all rights attaching thereto at
the time such shares are issued including the right to receive
and retain dividends declared, made or paid after the date of
issue.
No fractions of Interpublic Shares will be issued to IPR
Shareholders who will instead receive cash from Interpublic in
respect of their fractional entitlements as if such fractional
entitlements
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had been sold at the closing price of Interpublic Shares on the
date the Scheme of Arrangement becomes effective and converted
into sterling at the exchange rate prevailing on that date.
Based on the New York Stock Exchange closing price of $62 11/16
per Interpublic Share on 16 July, 1998 and an exchange rate of
$1.6336 to (pound)1, the Acquisition values the entire issued and
to be issued share capital of IPR at approximately (pound)103.6
million (assuming exercise of all outstanding options under the
IPR Share Option Schemes) and each IPR Share at approximately
70.8 pence.
On the above basis the Acquisition represents the following:
o A 43.0% premium over the middle market closing price of
49.5 pence per IPR Share on 16 July, 1998, the last
dealing day prior to this announcement;
o A 46.0% premium over the middle market closing price of
48.5 pence per IPR Share on 13 January, 1998, being the
day immediately before the start of the Offer Period;
o A 64.7% and 66.2% premium over the average middle
market closing price of 43.0 pence and 42.6 pence per
IPR share in the one month and three months,
respectively, prior to 14 January, 1998.
3. STRUCTURE OF THE TRANSACTION
The Acquisition will be effected by means of a Scheme of
Arrangement between IPR and its shareholders under Section 425 of
the Companies Act. This procedure involves an application by IPR
to the Court to approve the cancellation of all existing issued
IPR Shares (other than any held by Interpublic), in consideration
for which IPR Shareholders will receive Interpublic Shares on the
basis set out above. New IPR Shares will at the same time be
issued to Interpublic with the result that IPR will become a
wholly-owned subsidiary of Interpublic.
Before the Court approval referred to above can be sought, the
Scheme of Arrangement will require approval by IPR Shareholders
at a court meeting or meetings and at an Extraordinary General
Meeting. Once the necessary approvals from IPR Shareholders have
been obtained and the other conditions (set out in full in
Appendix II) have been satisfied or (where applicable) waived,
the Scheme will become effective upon sanction by the Court and
registration of the Court Order by the Registrar of Companies in
England and Wales, which is expected to occur in early October,
1998. Immediately following completion of the Acquisition, it is
expected that former holders of IPR's Shares will hold
approximately 1.9% of the enlarged issued common stock of
Interpublic.
The Acquisition will be a taxable transaction to US holders of
IPR Ordinary Shares and is expected to be accounted for as a
pooling of interests for U.S. accounting purposes.
Interpublic and IPR have entered into a transaction agreement
regarding the implementation of the Acquisition and the Scheme of
Arrangement. Each party has undertaken to use reasonable
2
endeavours to achieve satisfaction of the conditions to the
Acquisition. In particular both parties have given undertakings
in relation to the requirement that the transaction qualifies for
pooling-of-interests accounting treatment under generally
accepted accounting principles in the United States. IPR has
agreed, subject inter alia to the Directors' fiduciary duties,
that it and its Directors, senior management and advisers will
not initiate contact with third parties in order to solicit an
offer for IPR. The transaction agreement can be terminated by
either party in certain circumstances.
4. REASONS FOR THE ACQUISITION
The Boards of Interpublic and IPR believe that the Acquisition
represents an important opportunity for their respective
businesses.
In particular, the Board of Interpublic believes the Acquisition
will:
o mark the continuation of Interpublic's successful growth
strategy to build incremental revenue streams through
diversification. The combination of IPR arid Interpublic's
Weber Public Relations Worldwide business will result in a
public relations group with 129 offices and 52 affiliate
offices, making it one of the largest public relations
organisations in the world
o establish Interpublic as a leading operator in the fast
growing public relations industry
o provide Interpublic's clients with an additional global
communications network to meet their changing business needs
o enable Interpublic to continue to benefit from the growing
strategic alignment of advertising and public relations
o complement Interpublic's multinational client base and
proven management strength in servicing worldwide accounts.
The Board of IPR believes that:
o IPR Shareholders will achieve an attractive uplift in
capital value and a significant improvement in liquidity by
exchanging their IPR Shares for Interpublic Shares
o the Acquisition will allow IPR to expand its own global
public relations service using Interpublic's international
networks to supplement the existing IPR networks
o IPR's business will benefit from becoming part of one of the
largest organisations of advertising and marketing
communications companies in the world and IPR's position as
one of the largest public relations groups in the world will
be enhanced, improving its ability to serve global clients
and providing better career opportunities for staff
o the Acquisition will enable IPR to provide a wider range of
above and below the line marketing services to existing
clients than it currently provides.
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Commenting on the Acquisition, Lord Chadlington, Chairman of IPR,
said:
"We are delighted to have agreed terms with the Board of
Interpublic and look forward to becoming part of its global
communications business.
Our vision is to be the leader in global public relations and
reputation management. Being part of Interpublic is an ideal
strategic match for us since it will allow us to deepen and
expand our ability to serve clients in all parts of the world. We
are very excited by the future prospects of Interpublic and
believe the Acquisition will bring both immediate and long-term
benefits to our shareholders, our clients and our people."
Commenting on the Acquisition today, Philip H. Geier Jr.,
Chairman and Chief Executive Officer of Interpublic, made the
following statement:
"This agreement marks the Continuation of Interpublic's
successful growth strategy to build incremental revenue streams
through diversification. By making Interpublic a leading player
in the fast growing public relations industry, the Acquisition
also provides our agencies' clients with an additional global
communications offering to meet their changing business needs.
Public relations is an increasingly vital strategic
communications resource to manage corporate reputations
worldwide."
Interpublic will incur expenses in its financial year 1998
resulting from charges associated with the Acquisition. Excluding
these expenses, the Interpublic Board expects the Acquisition to
be accretive to earnings per share of Interpublic Common Stock in
the financial year ending 31 December, 1998. This statement
should not be interpreted to mean that the future earnings per
share of Interpublic Common Stock will necessarily be greater
than the earnings per share of Interpublic Common Stock for its
most recent reported year, the financial year ended 31 December,
1997.
5. RECOMMENDATION
The Board of IPR, which has been so advised by Lehman Brothers,
considers the terms of the Acquisition to be fair and reasonable.
In providing its advice to the Board of IPR, Lehman Brothers has
taken into account the commercial assessments of the Directors of
IPR.
The Board of IPR will unanimously recommend IPR Shareholders to
vote in favour of the resolutions to be proposed at the
Extraordinary General Meeting and the Court Meeting, as they
intend to do in respect of their own beneficial holdings of
7,758,64l IPR Shares, representing approximately 5.5% of IPR's
issued share capital.
6. INFORMATION ON INTERPUBLIC
Interpublic is one of the largest organisations of advertising
and marketing communications companies in the world. The
Interpublic Group employs more than 28,000 people in 120
countries worldwide. Interpublic's primary holdings include three
wholly-owned global advertising agency networks, McCann-Erickson
WorldGroup, Ammirati Puris Lintas and The
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Lowe Group, as well as four specialised communication services
units: Western International Media, DraftWorldwide, The Allied
Communications Group, Octagon and other related companies.
The advertising agency business is the primary business of
Interpublic. The business is conducted throughout the world
through three advertising agency systems, McCann-Erickson
WorldGroup, Ammirati Puris Lintas and The Lowe Group. Interpublic
also carries on a media buying business through its ownership of
Western International Media and its affiliates, as well as a
separate direct and promotional marketing business through its
ownership of DraftWorldwide. Other activities conducted by
Interpublic within the area of "marketing communications" include
public relations, graphic design, market research, sales
promotion, interactive services, sports and event marketing,
consulting and other related services.
Common Stock of Interpublic is traded on the New York Stock
Exchange and based on the closing price of $62 11/16 on 16 July,
1998 Interpublic had a market value of approximately $8527.6bn.
For the year ended 31 December, 1997, Interpublic reported net
income of $205.0 million (1996: $211.1 million) on gross income
of $3,264.1 million (1996: $2,786.7 million). In 1997 Interpublic
paid dividends of $0.50 per share (1996: $0.44). As at 31
December, 1997, Interpublic reported net assets of $1090.3
million (1996: $877.7 million).
For the three months ended 31 March, 1998, Interpublic reported
net income of $35.8 million (1997: $29.4 million) on gross income
of $775.3 million (1997: $679.3 million). As at 31 March 1998,
Interpublic reported net assets of $1,144.9 million (1997: $842.6
million).
Figures above are based on numbers as of 1 July, 1998, which have
been restated to adjust for previous acquisitions accounted for
as a pooling of interest under U.S. GAAP.
7. INFORMATION ON IPR
IPR is the world's largest independent public relations firm with
82 offices in 21 markets and 41 affiliate offices in a further 29
markets. The IPR Group employs approximately 2,100 people. IPR
provides a full range of public relations services including
investor relations, support for consumer products, information
technology, financial communications, health and pharmaceutical
programmes, and global public relations services.
The IPR Group's business is global reputation management. IPR's
objective is to meet the existing and future needs of clients
within the global business environment. This is delivered through
a heritage of local market understanding and contacts. IPR is
also a truly international organisation in terms of culture,
expertise, skills, geographical presence and clients.
In the year ended October 31, 1997 IPR had consolidated gross
income of (pound)125.8 million ((pound)222.3 million in 1996) and
consolidated operating profits of (pound)13.4 million (10.7%)
against (pound)14.1 million (11.5%) in 1996. Earnings per share
decreased from 5.5p in 1996 to 4.9p in 1997 on a net basis and
from 4.9p in 1996 to 4.7p in 1997 on an adjusted basis.
5
The Board of IPR today announced the interim results for the six
months period ended 30 April, 1998 and full details are provided
in Appendix III. Operating income in the period was (pound)60.1m
(1997: (pound)60.1m), representing an increase of 3.2% in
constant currencies. Profits were (pound)1.0m before exceptional
operating costs of (pound)4.4m, giving a pre-tax loss of loss of
(pound)3.4m (1997: (pound)3.9m). In light of the Acquisition, the
IPR Board has resolved not to pay an interim dividend in respect
of the six months ended 30 April, 1998.
8. MANAGEMENT AND EMPLOYEES
Interpublic confirms that the existing employment rights,
including pension rights, of all the IPR Group management and
employees will be fully safeguarded. Interpublic looks forward to
working with the IPR Group employees and believes that
opportunities for IPR employees will be strongly enhanced through
the Acquisition.
Shandwick, Golin/Harris and Weber will continue to be led by
their current management teams and will operate as autonomous,
independent organisations. A new board, representing each of the
three components, will be formed to serve as the decision-making
body on broad policy issues. This board, of which Lord
Chadlington will be Chairman and Chief Executive, will report to
the Interpublic Group.
9. IPR SHARE OPTION SCHEMES
An explanatory letter will be sent to holders of options under
the IPR Share Option Schemes explaining their entitlement, where
appropriate, to exercise their options. In accordance with the
terms of the IPR Share Option Schemes, all options granted under
such Schemes will lapse six months after the date of the Final
Court Order, expected to be in early October, 1998. IPR and
Interpublic have agreed to implement arrangements with the effect
that participants in the IPR Share Option Schemes who exercise
any options after the Scheme of Arrangement has become effective
will receive Interpublic shares on the same basis as under the
Scheme of Arrangement.
10. AFFILIATE AGREEMENTS
In order that Interpublic may obtain the benefit of accounting
for the completed Acquisition as a pooling of interests for U.S.
accounting purposes, certain IPR Shareholders and the IPR
Directors have agreed to enter into Affiliate Agreements with
Interpublic. These Affiliate Agreements have the effect of
regulating the Affiliates' ability to deal in IPR Shares or
Interpublic Shares issued to them as consideration under the
Scheme or upon exercise of their options. Under these agreements,
Affiliates agree not to deal in their Interpublic Shares until
Interpublic has published a set of financial results covering at
least 30 days of operations of the Combined Group, unless certain
conditions set out in the Affiliate Agreements are satisfied. It
is expected that such results will be published in February 1999.
6
11. FACTORS TO BE CONSIDERED IN ASSESSING AN INVESTMENT IN
INTERPUBLIC SHARES
Interpublic Shares are traded on the New York Stock Exchange in
the U.S. but are not listed on the London Stock Exchange or on
any other stock exchange. Morgan Stanley is a leading
market-maker in Interpublic Shares. An arrangement to enable
individual IPR Shareholders to deal in the Interpublic Shares
received by them as consideration under the Scheme has been set
up with Charles Schwab Limited. Further details of such
arrangement will be set out in the formal documentation relating
to the Acquisition.
Interpublic Shares are denominated in U.S. dollars and thus there
is a risk that the sterling value of the Interpublic Shares will
be adversely affected by currency movements. In addition, the
U.S. equity markets are trading overall at or near historical
highs and any decline in general market conditions would be
likely to affect adversely the Interpublic Share price. Likewise,
a failure by Interpublic to achieve its expected revenue and
earnings level would also be likely to adversely affect the
Interpublic Share price.
12. FORMAL DOCUMENTATION
The formal documentation relating to the Acquisition will be sent
to IPR Shareholders in due course. The Scheme Circular will
include the notices for the meetings of IPR Shareholders required
to be held to approve the Scheme and will specify the actions
that should be taken by IPR Shareholders.
13. EXPECTED TIMETABLE
The following is the expected timetable for the Scheme of
Arrangement, which is subject to change:
Posting of Scheme Circular mid-August, 1998
IPR Shareholders' Meetings early September, 1998
Final Court hearing to sanction early October, 1998
the Scheme
Effective Date of the Scheme, early October, 1998
de-listing and completion
of Acquisition
Date on which certificates mid-October, 1998
in respect of new Interpublic
Shares will be despatched
14. GENERAL
The Acquisition will be subject to the conditions set out in
Appendix II to this announcement and to such other terms to be
set out in the Scheme Circular as may be required to comply with
the Companies Act and the provisions of the City Code. Persons
not resident in the UK may be
7
affected by the laws of the relevant jurisdiction. Persons who
are not resident in the UK should inform themselves about and
observe any applicable requirements. Interpublic currently holds
2,000 IPR Shares. Except for this holding, neither Interpublic,
nor any of its Directors, nor so far as Interpublic is aware any
person acting in concert with Interpublic, owns or controls any
IPR Shares or has any option to acquire any IPR Shares or has
entered into any derivative referenced to securities of IPR which
remains outstanding.
ENQUIRIES
The Interpublic Group of Companies, Tel: (1-212) 399 8000
Philip H. Geier, Jr.
Chairman and CEO
Eugene P. Beard
Vice Chairman, Finance and Operations,
and CFO
Morgan Stanley Tel: (44-171) 425 5555
Piers de Montfort
Managing Director
Andrew Bell
Executive Director
International Public Relations plc Tel: (44-171) 408 2232
Lord Chadlington
Chairman and CEO
Philip Rogerson
Deputy Chairman
Lehman Brothers Tel: (44-171) 260 3026
Richard H. Collier
Managing Director
C. Simon A. Costa
Vice President
The conditions to the Acquisition are set out in Appendix II and
definitions of certain expressions used in this announcement are
set out in Appendix IV.
IPR's interim results are contained in Appendix III.
This announcement contains forward-looking statements including
with respect to the consummation of the Acquisition, the
integration of services and opportunities related to the
Acquisition. As such statements apply to future events, they are
subject to risks and uncertainties
8
which may cause the actual results to differ materially,
including, without limitation, the risk that the Acquisition will
not be consummated, integration risks related to the Acquisition
and the risk that the anticipated benefits of the Acquisition
will not be realised.
This announcement is published on behalf of Interpublic and IPR
and has been approved by Morgan Stanley & Co. Limited and Lehman
Brothers International (Europe), each of which is regulated by
The Securities and Futures Authority Limited, solely for the
purposes of section 57 of the Financial Services Act 1986.
Lehman Brothers International (Europe), which is regulated by The
Securities and Futures Authority Limited, is acting for IPR and
no one else in connection with the Acquisition and will not be
responsible to anyone other than IPR for providing the
protections afforded to customers of Lehman Brothers
International (Europe), nor for providing advice in relation to
the Acquisition.
Morgan Stanley & Co. Limited, which is regulated by The
Securities and Futures Authority Limited, is acting for
Interpublic and no one else in connection with the Acquisition
and will not be responsible to anyone other than Interpublic for
providing the protections afforded to customers of Morgan Stanley
& Co Limited, nor for providing advice in relation to the
Acquisition.
This announcement does not constitute an offer or an invitation
to purchase any securities.
Copies of this announcement are not being, and must not be,
mailed or otherwise distributed or sent in or into Canada,
Australia or Japan and persons receiving this announcement
(including custodians, nominees and trustees) must not distribute
or send it into or from Canada, Australia or Japan.
9
Appendix I
FINANCIAL EFFECTS OF THE ACQUISITION
The following tables show (for illustrative purposes only and on
the basis set out in the notes below) the financial effects for
IPR Shareholders if the Scheme becomes effective. No account is
taken of fractional entitlements, or any liability to taxation in
assessing the financial effects of acceptance.
I CAPITAL VALUE
A B
- -
Market value of 1.845
new Interpublic Shares (pound)70.80 (pound)70.80
Market value of 100 IPR Shares (ii) (pound)49.50 (pound)48.50
Increase in capital value (pound)21.30 (pound)22.30
--------------------------
Percentage increase 43.0% 46.0%
Notes:
(i) In both columns of the above numbers, the market value of
an Interpublic share is based on the last reported New York
Stock Exchange closing price of $62 11/16 per Interpublic
Share at the close of business on 16 July, 1998, the last
business day prior to the date of this announcement. This
has been converted to Sterling based on the U.S. Dollar to
Sterling spot exchange rate of 1.6336, quoted in the
Financial Times on 16 July, 1998.
(ii) The market value of a IPR Share it based on, in the column
in the table above headed (A): the closing middle market
quotation of 49.5 pence per IPR Share as derived from the
Daily Official List of the London Stock Exchange at the
close of business on 16 July, 1998, the last business day
prior to this announcement, and in the column in the table
above headed (B); the closing middle market quotation of
48.5 pence per IPR Share at the close of business on 13
January, 1998, the date immediately prior to the
commencement of the Offer Period.
II GROSS INCOME - DIVIDEND
Gross Dividend Income from 100
IPR Shares (i) (pound)2.05
Gross Dividend Income from 1.845
Interpublic Shares(ii) (pound)0.61
Decrease in Dividend Income 70.3%
Notes.
(i) Based on the total annual dividends declared and/or paid of
1.64 pence (net) per IPR Share for the twelve months ended
31 October, 1997, together with assumed associated tax
credits of 20/80ths on those dividends.
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(ii) Based on the four latest quarterly dividends of $0.15 (15
June, 1998),$0.13 (16 March, 1998), $0.13 (15 December,
1997), $0.13 (15 September, 1997), converted at the date of
payment at exchange rates of (pound)1 for $1.6353, $1.6655,
$1.6330 and $1.6051 respectively, being the US Dollar to
Sterling spot exchange rate quoted in the Financial Times
for the relevant date.
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Appendix II
Conditions to the Implementation of
the Scheme of Arrangement and the Acquisition
The Acquisition is subject to the conditions set out below:
A. The Acquisition is conditional upon:
(a) the approval of the Scheme of Arrangement by a
majority in number of IPR Shareholders present and
voting, either in person or by proxy and representing
at least 75% in value of the IPR Shares held by such
IPR Shareholders, at the Court Meeting (or any
adjournment thereof);
(b) any resolutions required to implement the Scheme and,
if necessary, amend the Articles of Association of IPR
being duly passed at the Extraordinary General Meeting
(or any adjournment thereof);
(c) the sanction of the Scheme of Arrangement by the High
Court and any reduction of capital involved therein
being confirmed by the High Court with or without
modification (agreed by both parties) and an office
copy of the Final Court Order and any minute of
reduction being duly delivered to the Registrar of
Companies for registration and the issue by the
Registrar of Companies of its certificate of such
registration; and
(d) the Scheme of Arrangement becoming unconditional and
becoming effective by not later than 17 November, 1998
or such later date as IPR and Interpublic may agree
and (if required) the High Court may approve.
B.
(a) No government or governmental, quasi-governmental,
supranational, statutory or regulatory body, court,
trade agency, association, institution or professional
or environmental body (or other person or body having
statutory or regulatory competence) in any
jurisdiction having decided to take, instituted,
implemented or officially communicated any action,
suit, proceeding, investigation or enquiry, or
enacted, made or proposed any statute or regulation or
order, or taken any other step which would or might
reasonably be expected to:
(i) make the Acquisition or its implementation void,
illegal or unenforceable under the laws of any
jurisdiction or, directly or indirectly, restrain,
prohibit, delay or otherwise interfere in the
implementation of, or impose additional conditions
or obligations with respect to, or otherwise
challenge the Acquisition or its implementation,
in each case in a manner which is material in the
context of the Acquisition; or
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(ii) require or prevent the divestiture by any member
of the Interpublic Group or any member of the IPR
Group of all or any part of their respective
businesses, assets or properties or impose any
material limitation on the ability of any of them
to conduct their respective businesses or own
their respective assets or properties, in each
case, in a manner or to an extent which would be
material in the context of the Interpublic Group
or the IPR Group, as appropriate, as the case may
be; or
(iii) impose any limitation on or result in a delay in
the ability of any member of the Interpublic Group
to acquire or to hold or effectively to exercise,
directly or indirectly, all or any rights of
ownership of IPR Shares or on the ability of any
member of the IPR Group or of the Interpublic
Group to hold or effectively to exercise all or
any rights of ownership of shares or securities in
any member of the IPR Group, in each case, in a
manner or to an extent which would be material in
the context of the Interpublic Group or the IPR
Group, as appropriate, as the case may be; or
(iv) require any member of the Interpublic Group or the
IPR Group to offer to acquire any shares owned by
any third party in the capital of any member of
the IPR Group or the Interpublic Group (other than
as disclosed to Interpublic in the agreed due
diligence materials prior to 17 July, 1998), in
each case, in a manner or to an extent which would
be material in the context of the Interpublic
Group or the IPR Group, as appropriate, as the
case may be; or
(v) otherwise materially and adversely affect the
business or profits of the Interpublic Group taken
as a whole and/or of the IPR Group taken as a
whole;
and all necessary filings having been made and all
applicable waiting and other time periods (including
any extension(s) thereof) during which any such
government, governmental, quasi-governmental,
supranational or statutory or regulatory body, court,
trade agency, association or institution or
professional or environmental body (or other person or
body having statutory or regulatory competence) in any
jurisdiction could decide to take, institute,
implement or officially communicate any such action,
suit, proceedings, investigation or enquiry having
expired, lapsed or been terminated;
(b) All authorisations, orders, recognitions, grants,
consents, licences, confirmations, clearances,
certificates, permissions and approvals necessary for
or in respect of the Acquisition having been obtained
in terms and in a form satisfactory to Interpublic
(acting reasonably) from all appropriate governments,
governmental, quasi-governmental, supranational,
statutory and regulatory bodies, courts, trade
agencies , associations, institutions or professional
or environmental bodies and from any other persons or
bodies in any jurisdiction with whom any member of
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the IPR Group has entered into contractual
arrangements and such authorisations, orders,
recognitions, grants, consents, licences,
confirmations, clearances, certificates, permissions
and approvals together with all authorisations,
orders, recognitions, grants , consents,
confirmations, clearances, certificates, permissions
and approvals necessary to carry on the business of
each member of the IPR Group remaining in full force
and effect (where the absence thereof would or could
reasonably be expected to have a material adverse
effect on the IPR Group taken as a whole) at the time
when the Acquisition would otherwise become
unconditional in all respects and there being no
official communication of any intention to revoke or
not renew any of them (where such revocation or
non-renewal would be material in the context of the
IPR Group taken as a whole) and all necessary
statutory or regulatory obligations in connection with
the Acquisition in any jurisdiction having been
complied with;
(c) Without prejudice to the generality of (b) above:
(i) the waiting period (and any extension thereof)
applicable to the Acquisition under the U.S.
Hart-Scott-Rodino Anti-Trust Improvements Act
1976 having been terminated or having expired;
and
(ii) in the event that a notification is made to the
U.K. Office of Fair Trading by IPR and
Interpublic, that office having indicated prior
to the commencement of the Final Hearing, in
terms satisfactory to Interpublic, that it is not
the intention of the Secretary of State for Trade
and Industry to refer the Acquisition or any
matters arising therefrom to the Monopolies and
Mergers Commission;
(d) except as disclosed to Interpublic in the agreed due
diligence materials prior to 17 July, 1998, there being
no provision of any arrangement, agreement, licence,
permit, franchise or other instrument to which any
member of the IPR Group is a party or by which any such
member or any of its respective assets is bound or
subject and which, in consequence of the proposed
Acquisition or because of a change in the control or
management of IPR or any member of the IPR Group, could
or might reasonably be expected to result in, to an
extent which would be material in the context of the
IPR Group taken as a whole:
(i) any monies borrowed by or any other indebtedness
or liabilities, actual or contingent, of any
member of the IPR Group being or becoming payable
or capable of being declared repayable
immediately or prior to their or its stated
maturity, or the ability of any such member to
borrow monies or incur any indebtedness being
withdrawn or inhibited;
(ii) the creation or enforcement of any mortgage,
charge or other security interest over the whole
or any part of the business, property or assets
of any member of the IPR Group or any such
mortgage, charge or other security interest
becoming enforceable;
14
(iii) any such arrangement, agreement, licence, permit,
franchise or instrument, or the rights,
liabilities, obligations or interests of any
member of the IPR Group thereunder, becoming
capable of being, terminated or adversely modified
or affected or any adverse action being taken or
any onerous obligation or liability, actual or
contingent, arising thereunder;
(iv) any asset or interest of any member of the IPR
Group being or falling to be disposed of or
charged or any right arising under which any such
asset or interest could be required to be
disposed of or charged;
(v) any member of the IPR Group ceasing to be able to
carry on business under any name under which it
presently does so; or
(vi) the respective financial or trading position of
any member of the IPR Group being adversely
affected;
(e) since 31 October, 1997 and except as disclosed in IPR's
annual report and accounts for the year then ended or
as otherwise publicly announced by delivery of an
announcement to the Company Announcements Office of the
London Stock Exchange or as would be disclosed by a
search at the Companies' Registry for England and Wales
against IPR made on 16 July, 1998 or as disclosed to
Interpublic in the agreed due diligence materials prior
to 17 July 7, 1998, or as disclosed in the Interim
Statement of IPR for the six month period ended 30
April, 1998:
(i) (save as between a wholly-owned Subsidiary of IPR
and IPR or another wholly-owned Subsidiary of IPR)
no member of the IPR Group having issued or agreed
to or authorised or proposed the issue of
additional shares of any class, or securities
convertible into, or rights, warrants or options
to subscribe for or acquire, any such shares or
convertible securities except for any shares
issued upon the exercise of any options granted
under any of the IPR Share Option Schemes and for
the scrip dividend in relation to the IPR final
dividend in respect of the year ended 31 October,
1997;
(ii) no member of the IPR Group having recommended,
declared, paid or made any bonus, dividend or
other distribution (save as between a wholly-owned
Subsidiary of IPR and IPR or another wholly-owned
Subsidiary of IPR) other than the IPR final gross
dividend of 1.5125 pence per share in respect of
the year ended 31 October, 1997;
(iii) no member of the IPR Group having made or
authorised or proposed or announced any material
change in its loan capital;
(iv) (save for transactions between a wholly-owned
Subsidiary of IPR and IPR or another wholly-owned
Subsidiary of IPR) no member of the IPR Group
having merged with or demerged or acquired any
body corporate or
15
acquired or (save in the ordinary course of
business) disposed of or transferred, mortgaged
or charged or created any security interest over
any assets or any right, title or interest in any
assets (including shares and trade investments)
or authorised, proposed or announced its
intention to do so (in each case in a manner
which could have a material adverse effect on the
IPR Group taken as a whole);
(v) no member of the IPR Group having issued,
authorised or proposed the issue of any debentures
or (save in the ordinary course of business)
incurred any indebtedness or contingent liability
which, in any such case, is material in the
context of the IPR Group taken as a whole;
(vi) neither IPR nor any of its material Subsidiaries
having purchased, redeemed or repaid or announced
any proposal to purchase, redeem or repay any of
its own shares or other securities or reduced or
made any other change to any part of its share
capital;
(vii) no member of the IPR Group having entered into or
varied any contract (including for the avoidance
of doubt, any guarantee), transaction,
arrangement, or commitment (whether in respect of
capital expenditure or otherwise), reconstruction,
amalgamation, scheme or other arrangement which is
of a long term, onerous, or unusual nature or
magnitude or which would be restrictive on the
business of any member of the IPR Group or the
Interpublic Group (following the Acquisition), or
which involves or would involve an obligation of
such a nature or magnitude or which could be so
restrictive or which is other than in the ordinary
course of business and which in each case is
material in the context of the IPR Group or the
Interpublic Group (following the Acquisition), as
the case may be, taken as a whole;
(viii) neither IPR nor any of its material Subsidiaries
having entered into or changed or made any offer
(which remains open for acceptance) to enter into
or change the terms of any contract with any of
the directors of IPR or any of its material
Subsidiaries;
(ix) no member of the IPR Group having taken any
corporate action or had any legal proceedings
instituted or threatened against it for its
winding-up (voluntarily or otherwise), dissolution
or reorganisation or for the appointment of a
receiver, administrator, administrative receiver,
trustee or similar officer of all or any of its
assets and revenues or any analogous proceedings
in any jurisdiction or appointed any analogous
person in any jurisdiction (in each case in a
manner which could reasonably be expected to have
a material adverse effect on the IPR Group taken
as a whole);
(x) no member of the IPR Group having been unable or
admitted in writing that it is unable to pay its
debts or having stopped or suspended (or
16
threatened to stop or suspend) payment of its
debts generally or ceased or threatened to cease
carrying on all or a substantial part of its
business (in each case in a manner which could
reasonably be expected to have a material adverse
effect on the IPR Group taken as a whole);
(xi) no member of the IPR Group having waived or
compromised any claim which is material in the
context of the IPR Group, taken as a whole; or
(xii) neither IPR nor any of its material Subsidiaries
having made any alteration to its respective
memorandum or articles of association, or
equivalent constitutional document;
(f) since 31 October, 1997 and except as disclosed in the
IPR annual report and accounts for the year then ended,
or as otherwise publicly announced by delivery of an
announcement to the Company Announcements Office of the
London Stock Exchange or as disclosed to Interpublic in
the agreed due diligence materials prior to 17 July, or
as disclosed in the Interim Statement of IPR for the
six month period ended on 30 April, 1998;
(i) there having been no material adverse change in
the business, assets, financial or trading
position or profits of the IPR Group taken as a
whole;
(ii) no investigation or enquiry by any third party
having statutory or regulatory competence (save as
a result of the proposed Acquisition) and no
litigation, arbitration proceedings, prosecution
or other legal proceedings to which any member of
the IPR Group is or may become a party (whether as
plaintiff or defendant or otherwise) having been
threatened in writing, announced or instituted by
or remaining outstanding against or in respect of
any member of the IPR Group which, in any such
case is material in the context of the IPR Group
taken as a whole; and
(iii) no contingent or other liability of any member of
the IPR Group having arisen which would or could
reasonably be expected to materially and adversely
affect the IPR Group taken as a whole;
(g) Interpublic not having discovered:
(i) that any financial or business or other
information publicly disclosed at any time by or
on behalf of any member of the IPR Group is
misleading, contains a misrepresentation of fact
or omits to state a fact necessary to make the
information contained therein not misleading in
any case which has not subsequently been
corrected by such disclosure and, in any event,
which is material in the context of the IPR Group
taken as a whole;
(ii) that any financial or business or other
information disclosed by or on behalf of any
member of the IPR Group privately to any member
of the
17
Interpublic Group (except for forecasts,
statements of opinion or estimates) contains a
misrepresentation of fact or omits to state a
fact necessary to make the information contained
therein not misleading in any case which has not
subsequently been corrected by such disclosure
and, in any event, which is material in the
context of the IPR Group taken as a whole; or
(iii) that any member of the IPR Group is subject to any
liability, contingent or otherwise, which is not
disclosed in IPR's annual report and accounts for
the financial year ended 31 October, 1997 or in
the Interim Statement of IPR for the six month
period ended on 30 April, 1998 or which has not
been disclosed to Interpublic in the agreed due
diligence materials prior to 17 July, 1998, and
which is material in the context of the IPR Group
taken as a whole;
(h) Except as disclosed to Interpublic in the agreed due
diligence materials prior to 17 July, 1998, Interpublic
not having discovered that:
(i) any past or present member of the IPR Group has
not complied with all applicable legislation or
regulations of any jurisdiction with regard to the
disposal, discharge, spillage, leak or emission of
any waste or hazardous substance or any substance
likely to impair the environment or harm human
health and that such non-compliance would be
likely to give rise to any liability (whether
actual or contingent) on the part of any member of
the IPR Group which would be material in the
context of the IPR Group taken as a whole; or
(ii) there is, or could reasonably be expected to be,
any material liability (in the context of the IPR
Group taken as a whole), whether actual or
contingent, to make good, repair, reinstate or
clean up any property now or previously owned,
occupied or made use of by any past or present
member of the IPR Group or any controlled waters
under any environmental legislation, regulation,
notice, circular or order of any relevant
authority or third party otherwise;
(i) The shares of Interpublic Common Stock to be issued as
consideration under the Scheme being approved for
listing on the New York Stock Exchange;
(j) Each of Interpublic and IPR having received a letter
from Price Waterhouse LLP and Ernst & Young dated the
date of the Final Hearing regarding the
appropriateness of pooling-of-interest accounting
treatment for the Acquisition under Accounting
Principles Board Opinion Number 16 if the Scheme of
Arrangement is closed and consummated in accordance
with the transaction agreement entered into by
Interpublic and IPR with effect from 17 July, 1998;
18
(k) Interpublic having received from each person who is an
Affiliate of IPR a letter in a form agreed between the
parties, properly executed.
The Acquisition is also conditional on the conditions set out in
B. above being satisfied or waived and accordingly the necessary
action to make the Acquisition effective will not be taken unless
such conditions (as amended if appropriate) have been satisfied
or waived. IPR has agreed that Interpublic may unilaterally waive
any of the conditions in B., apart from Condition B.(a)(i),
Condition B.(b), Condition B.(c) and Condition B.(j) which may
only be waived jointly by IPR and Interpublic.
19
Appendix III
INTERIM RESULTS FOR THE PERIOD ENDED 30 APRIL 1998
Operating Overview:
- -------------------
IPR today announced profits of (pound)1.0m before exceptional
operating costs of (pound)4.4m, giving a pre-tax loss of
(pound)3.4m (1997: profit (pound)3.9m). The reduction in profits
arose from a higher level of operating costs in the first few
months of the period, which has now been addressed, combined with
slower growth in the IPR Group operating income.
Operating income in the period was (pound)60.lm (1997:
(pound)60.m), representing an increase of 3.2% in constant
currencies. The Americas and Continental Europe grew by 7.8% and
9.4% respectively, and the UK and Asia Pacific were down by 7.3%
and 3.6% respectively, in constant currencies.
Earnings per share, on an adjusted basis (excluding prior year
tax and exceptional operating costs) were 0.5p (1997: 2.0p). The
tax rate of 31%, based on a full year projection, compares with
30% in the first half of 1997.
Shareholders will be aware that the IPR Board has recently
undertaken a major reorganisation and restructuring of the IPR
Group, whilst at the same time it has been conducting a review of
IPR's strategic options. These activities have taken up a large
part of senior management's time and, together with the
uncertainty surrounding the IPR Group's future ownership, have
adversely impacted fee revenues in the first half.
The exceptional operating costs, amounting to (pound)4.4m, of
which (pound)2.5m was advised to shareholders in February 1998
and up to a further (pound)1.5m in April 1998, relate to the
restructuring of management, staff and properties across the IPR
Group, with a view to on-going cost base of the IPR Group.
Savings from the restructuring are expected to exceed (pound)2m
in the 1998 financial year, with benefits largely flowing in the
second half. During this financial year, on-going central costs
will have been cut to a running rate of under 2% of IPR Group
turnover and appropriate regional responsibilities and costs have
now been reallocated.
In February 1998, the three executives who are directly
responsible for IPR's major businesses worldwide were appointed
to the IPR Board and an international dual brand strategy was
adopted - Shandwick and Golin/Harris. The organisation has thus
become flatter, bringing the operations in closer contact with
the IPR Board.
In the light of the Acquisition, the IPR Board has resolved not
to pay an interim dividend in respect of the six months ended 30
April, 1998.
Americas
In the Americas, Shandwick has undertaken a restructuring of its
management team. The business has been realigned around six core
industry sectors, which the IPR Board believes have
20
the potential for high growth: technology, consumer and
lifestyles, healthcare, corporate, industrial and the emerging
field of convergence of technology, entertainment and
information.
This new approach combines Shandwick expertise across all of the
offices in which it operates in the United States. Key client
wins included the Hong Kong Economic and Trade Commission and
Monsanto, along with expanded business from existing clients
including Eastman Kodak Company and Microsoft.
The first half of the year at Golin/Harris was highlighted by the
development of a global branding plan aimed at achieving its
international expansion. For example, Paragon, a London- based,
full service agency, has been repositioned as a Golin/Harris
operating unit, and the offices in Canada have also aligned with
the Golin/Harris management structure.
Golin/Harris also continued the development of its "areas of
expertise" strategy which ensures all of its capabilities,
wherever located, are utilised to help meet clients'
communications objectives.
One of the major new client wins in the first half was Texas
Instruments. Golin/Harris will work with this global technology
company in several regions of the world and has established
offices in Dallas and Houston to manage the account. Other new
clients include John Deere and a major AIDS public education
program for the State of Illinois. Golin/Harris has also been
engaged on a number of merger assignments, including the
integration of Chrysler and Daimler Benz.
Europe
- ------
The UK and Continental European businesses have been brought
together as one operating unit with effect from 1 July, 1998. The
combined European operations have had substantial success over
the past few months in winning new business, although it is
expected to take some time to bring margins back to previous
levels.
The London offices, which represent a significant portion of
European revenues, have been reorganised over the past few
months, drawing together resources under practice specialities,
so as to allow enhanced levels of client service and improved
operating effectiveness.
In the UK, the business is regaining market share in financial
and corporate communications and is again winning high-profile
mandates including work for Halifax plc on its possible bid for
Birmingham Midshires, Fidelity Investments and the London
International Financial Futures and
Options Exchange.
The public affairs have won a large number of assignments
including the Clear Channel bid for the More Group and work for
Assured British Meat following the BSE crisis.
New global assignments have been won for Acorn and pan-European
campaigns for Medtronic. In Holland, Shandwick has been appointed
by Nissan and the public affairs company in Brussels has been
chosen to support Fortis. Other new clients include Hoechst
Schering AgrEvo GmbH in Germany, Bayer in Spain and Banco
Populare di Lodi in Italy.
21
A new office in Munich has been acquired to further strengthen
the Group's already important position in the German market.
Asia Pacific
- ------------
In Asia Pacific, the region has been affected by the economic
turmoil, particularly in Hong Kong, but whilst competitors are
withdrawing from some markets, IPR's business remains relatively
strong, having fallen by less than 4% compared with the same
period last year.
Japan and Australia continue to be steady performers despite
difficult economic conditions. The business in Thailand, which is
benefiting from a reorganisation which took place over the past
two years, is having a good year assisted by new business from
the Thailand Financial Sector Restructuring Authority and Arthur
Andersen.
In China, strengthened management has won assignments from
Universal Studios and the British in China Campaign for the
British Business Forum. In Hong Kong, IPR was appointed by
Henderson (China) Investment Co Ltd, a large property developer,
and CMG Asia, part of the Colonial Mutual Group.
The Singapore business remains strong with work from existing
clients being expanded. New assignments include the Societe
Internationale de Telecommunications Aeronautiques. In Taiwan,
new business was won from Discovery Channel.
Prospects
- ---------
The restructuring and reorganisation which took place earlier in
the year is expected to have a beneficial effect on the business
going forward and the resulting cost savings will be reflected in
the second half of the year.
Notwithstanding the slow start to the year, and the uncertainty
which has surrounded IPR in recent months, the strength of the
new business book is encouraging and there are a number of
presentations for major prospective clients which have either
recently been completed or are planned in the near future.
Although it is impossible to be precise about the rate at which
this new business will translate into fee revenues, if the
resulting business comes on stream quickly, the IPR Board
anticipates a healthy increase in income levels for the remainder
of the financial year.
The IPR Board would like to thank its shareholders, clients and
staff for their loyalty and continued support during these
uncertain times and looks forward to the future development of,
and opportunities for, the IPR Group.
Lord Chadlington
Chairman
17 July, 1998
Note: Constant currency growth in the Americas is based on the
average US$ exchange rate in the 6 months to 30 April, 1997 of
(pound)1: $1.642.
22
REVIEW REPORT BY THE AUDITORS TO IPR
We have reviewed the interim financial information for the six
months ended 30 April 1998 which is the responsibility of, and
has been approved by, the Directors of IPR. Our responsibility is
to report on the results of our review.
Basis of Opinion
- ----------------
Our review was carried out having regard to the Bulletin "Review
of Interim Financial Information" issued by the Auditing
Practices Board. This review consisted principally of applying
analytical procedures to the underlying financial data, assessing
whether accounting policies have been consistently applied, and
making enquiries of management responsible for financial and
accounting matters. The review excluded audit procedures such as
tests of controls and verification of assets and liabilities and
was therefore substantially less in scope than an audit performed
in accordance with Accounting Standards. Accordingly, we do not
express an audit opinion on the interim financial information.
Opinion
- -------
On the basis of our review, in our opinion the interim financial
information has been prepared using accounting policies
consistent with those adopted by IPR in its financial statements
for the year ended 31 October 1997 and we are not aware of any
material modifications that would be made to the interim
financial information as presented.
Ernst & Young
Registered Auditor
17 July, 1998
23
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
6 MONTHS ENDED 30 APRIL 1998
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
ended ended ended
30 April 1998 30 April 1997 31 October 1997
(pound)000 (pound)000 (pound)000
------------- ------------- ---------------
Turnover 84,893 89,601 173,562
--------- --------- ---------
Operating income 60,089 60,142 125,848
Operating costs
Excluding exceptional
operating costs (56,973) (54,040) (122,416)
Exceptional operating costs (4,400) - -
--------- --------- ---------
Total operating costs (61,373) (54,040) (122,416)
Operating profit
Operating profit before
exceptional operating costs 3,116 6,102 13,432
Exceptional operating costs (4,400) - -
--------- --------- ---------
Operating (loss)/profit
after exceptional operating
costs (1,284) 6,102 13,432
Interest, net (2,096) (2,179) (4,390)
Profit on ordinary activities
before taxation before
exceptional operating costs 1,020 3,923 9,042
Exceptional operating costs (4,400) - -
--------- --------- ---------
(Loss)/profit on ordinary
activities before taxation
after exceptional operating
costs (3,380) 3,923 9,042
Taxation credit/(charge) 1,048 (1,177) (2,312)
--------- --------- ---------
(Loss)/profit on ordinary
activities after taxation (2,332) 2,746 6,730
Minority interests - (4) -
---------- ---------- ----------
(Loss)/profit attributable
to members of the parent (2,332) 2,742 6,730
undertaking
Dividends - (579) (2,253)
---------- ---------- ----------
Retained (loss)/profit for
the period (2,332) 2,163 4,477
---------- ---------- ----------
Earnings per share
- - Net basis (1.7p) 2.0p 4.9p
- - Nil distribution basis
excluding prior year tax
and exceptional operating
costs 0.5p 2.0p 4.7p
Earnings per share "on a nil distribution basis excluding prior
year tax and exceptional operating costs" are calculated after
deducting prior year tax credit of (pound)200,000 in the twelve
months to 31 October 1997 and adding back exceptional operating
costs of (pound)4,400,000, less tax of (pound)1,364,000, in the
six months to 30 April 1998.
24
UNAUDITED CONSOLIDATED BALANCE SHEET
6 MONTHS ENDED 30 APRIL 1998
Unaudited Unaudited Audited
30 April 1998 30 April 1997 31 October 1997
(pound)000 (pound)000 (pound)000
------------- ------------- ---------------
Fixed assets
Tangible assets 10,158 8,318 10,267
Investments 66 74 61
Investments in own shares 419 420 419
--------- --------- ---------
10,643 8,812 10,747
--------- --------- ---------
Current assets
Work in progress 3,327 3,300 2,335
Debtors 38,224 41,193 38,677
Cash at bank 1,454 3,002 2,396
--------- --------- ---------
43,005 47,495 43,408
--------- --------- ---------
Creditors due within
one year
Bank loans and overdrafts 14,222 10,549 6,255
Trade and other creditors 30,092 33,916 32,794
Taxation 3,681 4,539 6,351
--------- --------- ---------
47,995 49,004 45,400
--------- --------- ---------
Net current liabilities (4,990) (1,509) (1,992)
--------- --------- ---------
Total assets less current
liabilities 5,653 7,303 8,755
--------- --------- ---------
Creditors due after more
than one year 40,023 41,225 39,472
Provisions for liabilities
and charges 10 150 10
(34,380) (34,072) (30,727)
--------- --------- ---------
Capital and reserves
Called up share capital 1,397 1,375 1,391
Share premium account 27,410 27,370 27,329
Other reserves (92,136) (91,865) (91,117)
Profit and loss account 28,949 28,980 31,629
--------- --------- ---------
Equity shareholders' funds (34,380) (34,141) (30,768)
Minority interests - 69 41
--------- --------- ---------
(34,380) (34,072) (30,727)
--------- --------- ---------
25
UNAUDITED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
6 MONTHS ENDED 30 APRIL 1998
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
ended ended ended
30 April 1998 30 April 1997 31 October 1997
(pound)000 (pound)000 (pound)000
------------- ------------- ---------------
Profit for the financial period (2,332) 2,742 6,730
Exchange rate adjustments (net) (426) (231) 350
------- ------- -------
Total recognised gains and
losses for the period (2,758) 2,511 7,080
------- ------- -------
UNAUDITED RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
6 MONTHS ENDED 30 APRIL 1998
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
ended ended ended
30 April 1998 30 April 1997 31 October 1997
(pound)000 (pound)000 (pound)000
---------- ---------- ----------
Total recognised gains and
losses for the period (2,758) 2,511 7,080
Dividends (579) (2,253)
New share capital subscribed 165 219 529
Goodwill relating to acquisitions (1,019) (6) -
Goodwill written back - - 162
------- ------- -------
Total movement during the period (3,612) 2,145 5,518
Opening shareholders' funds (30,768) (36,286) 36,286)
Closing shareholders' funds (34,380) (34,14l) (30,768)
------- ------- -------
26
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
6 MONTHS ENDED 30 APRIL 1998
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
ended ended ended
30 April 1998 30 April 1997 31 October 1997
(pound)000 (pound)000 (pound)000
---------- ---------- ----------
Cash flow from operating
activities (1,930) 533 12,248
Returns on investments and
servicing of finance (1,889) (2,136) (4,033)
Taxation (1,648) (790) (1,200)
Capital expenditure and
financial investment (1,213) (770) (1,460)
Acquisitions and disposals (96) (773) (929)
Equity dividends paid (1,598) (1,359) (1,608)
------- ------- -------
Cash (outflow)/inflow before
use of liquid resources and
financing (8,374) (5,295) 3,018
Net cash outflow from financing (720) (717) (4,740)
------- ------- -------
Decrease in cash in the period (9,094) (6,012) (1,722)
------- ------- -------
- -----------------------------------------------------------------------------
Reconciliation of net cash
flow to movement in net debt
Decrease in cash in the period (9,094) (6,012) (1,722)
Cash inflow from decrease in
debt and lease financing 807 937 4,927
------- ------- -------
Change in net debt resulting
from cash flows (8,287) (5,075) 3,205
New finance leases (582) (649) (3,954)
Translation difference 285 26 413
------- ------- -------
Movement in net debt in the
period (8,584) (5,698) (336)
Net debt brought forward (43,679) (43,343) (43,343)
------- ------- -------
Net debt carried forward (52,263) (49,041) (43,679)
------- ------- -------
27
GEOGRAPHICAL ANALYSIS
6 MONTHS ENDED 30 APRIL 1998
VARIANCE %
-------------------
1998 1997 Sterling Constant
------------------ ------------------- -------- --------
% (pound)000 % (pound)000 % %
----- ---------- ----- ---------- ----- -----
Operating Income
United Kingdom 19.3% 11,602 20.8% 12,510 -7.3% -7.3%
Continental Europe 7.4% 4,474 7.6% 4,572 -2.1% 9.4%
Americas 62.5% 37,534 58.7% 35,255 6.5% 7.8%
Asia Pacific 10.8% 6,479 12.8% 7,711 -16.0% -3.6%
----- ------- ----- ------- ----- -----
Continuing Operations 100.0% 60,089 100.0% 60,048 0.1% 3.3%
----- ------- ----- ------- ----- -----
Discontinued operation 0 94
------- -------
Total 60,089 60,142 -0.1% 3.2%
- ----- ------- ------- ----- -----
Margin Margin
------ ------
Operating Profit % %
United Kingdom 3.9% 458 11.3% 1,419 -67.7% -67.7%
Continental Europe 2.4% 107 1.9% 86 24.1% 80.0%
Americas 6.6% 2,459 12.1% 4,280 -42.5% -39.5%
Asia Pacific 1.4% 92 5.2% 399 -77.0% -47.7%
----- ------- ----- ------- ----- -----
Continuing Operations 5.2% 3,116 10.3% 6,184 -49.6% 44.8%
----- -----
Discontinued operation 0 (82)
------- ------- ----- -----
Operating Profit 3,116 6,102 -48.9% -44.1%
Interest (net) (2,096) (2,179) -3.8% -3.1%
------- ------- ----- -----
Pre Exceptional Profit 1,020 3,923 -74.0% -66.8%
------- ----- -----
Exceptional operating
costs (4,400) 0
------- -------
Pre Tax (Loss)/Profit (3,380) 3,923
------- -------
Notes:
"Sterling" amounts in the "Variance" column are based upon
foreign currency results converted into Sterling at average
exchange rates in each half year. "Constant" amounts are based
upon conversion into Sterling at constant first half 1997 average
exchange rates, and give comparability. Discontinued operation
relates to the business of Ashdown Press Ltd in the UK disposed
of with effect from 1 December, 1996. The segmental analysis of
exceptional operating costs is, in (pound)000: United Kingdom
(pound)1,316, Continental Europe (pound)202, Americas
(pound)2,589, Asia Pacific (pound)293.
The above statements do not constitute statutory accounts.
Statutory accounts for the year ended 31 October, 1997, on which
the report of the auditors was unqualified, have been filed with
the Registrar of Companies.
A copy of the Interim Statement will be sent to all shareholders
and is available at the registered office of International Public
Relations plc, 61 Grosvenor Street, London W1X 9DA.
28
Appendix IV
DEFINITIONS
The following definitions apply throughout this press
announcement unless the context requires otherwise:
"Acquisition" The proposed acquisition by Interpublic
of the entire issued and to be issued
share capital of IPR to be effected by
means of the Scheme
"Act" or "Companies
Act" The Companies Act 1985 of Great Britain
(as amended)
"Affiliate" Persons who control, or are controlled
by, or are under common control with
Interpublic or IPR (generally, certain
executive officers and directors and
principal shareholders thereof)
"Affiliate
Agreements" Agreements entered into or to be
entered into between the Affiliates and
Interpublic as described in paragraph 10
of this press announcement
"Business Day" A day (excluding Saturdays and public
holidays) on which banks are open for
business in London
"City Code" The City Code on Takeovers and Mergers
"Combined Group" The combined Interpublic Group and IPR
Group following the Acquisition
"Court" The High Court of Justice of England and Wales
"Court Meeting" The meeting or meetings of IPR Shareholders
(or different classes thereof) to be convened
pursuant to an Order of the Court for the purposes
of approving the Scheme
"Directors" The directors of IPR or Interpublic as the
context requires
"Effective Date" The date on which the Scheme becomes effective,
which is expected to be in early October, 1998
"Extraordinary
General Meeting" The extraordinary general
meeting of IPR Shareholders in
connection with the Scheme expected to
be held in early September, 1998
"Final Court Order" The order of the Court sanctioning
the Scheme under Section 425 of the Companies
Act and confirming any cancellation
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of the share capital in connection therewith
under Section 137 of the Companies Act
"Interpublic" The Interpublic Group of Companies, Inc.
"Interpublic Board" The board of directors of Interpublic
"Interpublic Shares"
or "Common Stock of
Interpublic" Common stock of 10c each in the share capital of
Interpublic
"Interpublic Group" Interpublic and its Subsidiaries and its Subsidiary
undertakings
"IPR" International Public Relations plc
"IPR Board" The board of directors of IPR
"IPR Group" IPR and its Subsidiaries and its Subsidiary
undertakings
"IPR Shares" Ordinary shares of 1p each in the share capital of IPR
"IPR Share Option
Schemes" The International Public Relations plc
Executive Share Option Scheme, the
International Public Relations
plc Savings-Related Share Option Scheme, the
International Public Relations plc 1987 Stock
Option Plan and the International Public
Relations plc Savings-Related Share Option
Scheme
"Lehman Brothers" Lehman Brothers International (Europe)
"Meetings" The Court Meeting and the Extraordinary
General Meeting
"Morgan Stanley" Morgan Stanley & Co. Limited
"Offer Period" The period commencing on 14 January,
1998, being the date that the
Board of IPR announced that
it had been having preliminary
discussions about a range of strategic
options including an offer for the
whole of the the issued share capital
of the Company, and ending upon the
Scheme becoming effective, which is
expected to be in early October, 1998
"Scheme" or "Scheme The proposed scheme of arrangement
of Arrangement" under section 425 of the Act between IPR
and IPR Ordinary Shareholders to be set
out in the Scheme Circular
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"Scheme Circular" The circular proposed to be
despatched to IPR Shareholders setting
out the details of the Acquisition and
the Scheme, certain information about
IPR and Interpublic and containing
notices of the Meetings
Shareholders" or Holders of IPR Shares
"IPR Shareholders"
"Subsidiary" has the meaning given in the Companies
Act and Subsidiaries shall be construed
accordingly
"Subsidiary
undertaking" has the meaning given in the Companies
Act and Subsidiary undertakings shall be
construed accordingly
"U.K." The United Kingdom of Great Britain
and Northern Ireland
"United States"
or the "U.S" The United States of America, its territories
and possessions, any state of the United States
of America, any other areas subject to its
jurisdiction and the District of Columbia
"U.S. GAAP" U.S. Generally Accepted Accounting Principles
In this document, unless otherwise stated, where the sterling
equivalent is given for a U.S. dollar, or vice versa, the
USD/Sterling exchange rate used is 1.6336 (being the spot rate
quoted in the Financial Times on 16 July, 1998).
References to 16 July, 1998 are to the latest practicable date
prior to the publication of this announcement.
References to $ are to U.S. dollars, and references to(pound) are
to pounds sterling.
31