Havas Brings Circle.com Under its Roof
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French ad group Havas Advertising this week absorbed interactive agency Circle.com in a deal valued at around $30 million, continuing a string of consolidation in the i-services space.
According to terms of the agreement, Havas would exchange American depository shares for the tracking stock of Baltimore-based Circle.com, a unit of Snyder Communications. Havas owns all of Snyder's common stock except for Circle's, through an acquisition in September.
Based on the closing price of $14.8125 for Havas ADSs last Friday, each share of the NASDAQ-traded CIRC would be exchanged for 0.0857 Havas Advertising ADSs, or about $1.27 per share. Circle.com's stock is currently trading at $1.125. The transaction is subject to Havas and Snyder Communications shareholder approvals and certain closing conditions.
"When we purchased Snyder, we thought it worthwhile to see if the delivery of [interactive] capabilities through a separate business unit such as Circle.com had strategic or financial advantages," said Havas chairman and chief executive officer Alain de Pouzilhac. "We have concluded it does not."
According to spokespeople within Havas, Circle.com will be merged with Havas' Euro RSCG Worldwide ad unit, under its Euro RSCG Interaction roster of interactive shops.
"We believe that both our clients and Circle.com's clients will gain a great deal by fully integrating Circle.com within Euro RSCG, and we anticipate seeing a combination of top- and bottom-line synergies almost immediately," said Euro RSCG chairman and CEO Bob Schmetterer.
Circle.com's client roster includes IBM, Flooz, and Symantec.
"We have a very clear vision based on the convergence of traditional advertising, database marketing, CRM and interactivity, and we've been implementing that vision for the past four years with Euro RSCG Interaction," Schmetterer added. "Circle.com is a perfect fit with that vision and strategy."
The company recently underwent a fairly dramatic management shakeup in November, just after posting a quarter of declining revenues and increasing losses. The shakeup saw the departures of former CEO Robert Wilke and Victor Mandel, Circle.com's executive vice president for finance and development, who resigned under pressure from Snyder, citing "differences of opinion concerning performance." Tarzian, formerly chief strategic officer, assumed the top post shortly thereafter.
"We view the merger of our business with that of Havas Advertising's as a very positive step," said Circle.com CEO Charlie Tarzian. "Merging will permit us to make the best use of [employees'] skills for the benefit of our clients as part of an integrated communications solution, which is clearly the strategic future of the business."
Circle.com is expected to report a before-charges loss of $16 million for the year, on revenues of about $67 million. Havas said it expected the transaction to have little impact on its own cash earnings per share in 2001.
Circle.com isn't the only ad group-owned interactive shop to be rolled back into a parent with the stated goal of providing integrated solutions for clients. In October, Interpublic Group absorbed Zentropy Partners, once a darling of the West Coast i-agency scene, into its McCann-Erickson ad unit.
I-shops overall continue to see tough times. Razorfish this week admitted that it cut 400 employees during its recent restructuring, and Agency.com, which laid off 190 in December, said it anticipates more quarters of difficulty for the industry.