IPG Interpublic Group of Companies Inc

Advertisement giant Interpublic Group of Companies, Inc. (IPG), which bought approximately 0.5% stake in Facebook (FB) way back in 2006, has reached an agreement to sell approximately half of its investment for $133 million to an undisclosed buyer.

The interest, amounting to about 0.5% of Facebook’s total shares, was bought for less than $5 million in 2006, which Facebook agreed to sell to Interpublic in exchange for the company’s agreement to spend $10 million with Facebook for the clients of its agencies.

Since then, the strategic value of Interpublic’s initial investment in the social network has moderated, while the financial value of the stake appreciated significantly over time. This has brought a fair prospect for Interpublic to divest a portion of their position for net cash proceeds of $133 million in a private negotiation. Interpublic group expects a pre-tax gain of $132 million, upon closing of the sale.

The money will be utilized toward Interpublic’s existing program of repurchasing shares of its common stock. The board has authorized an increase in the share repurchase program by $150 million, a rise of $450 million from its initial $300 million; creating opportunity to further enhance shareholder value, reflecting long-term prospects.

Interpublic acquired the stake in 2006 in an effort to signal the current and potential clients, the company’s presence in the field of social marketing as well as its attempt in identifying strategic partnerships while realizing financial gain.

Facebook, which was then valued in the range of $200 million to $300 million, has increased more than fivefold in less than two years, with a value of $66.5 billion in a recent share sale, ahead of its expected initial public offering next year.

On this backdrop, Interpublic’s divestment of half of its stake is being seen as an indication that the secondary market for the social network’s shares may be at an all time high level.

New Yorkbased, Interpublic Group of Companies Inc. together with its subsidiaries, provides advertising and marketing services worldwide.  The company directly competes with its peers, such as Omnicom Group Inc. (OMC), Publicis Groupe SA and WPP plc (WPPGY). 

We currently maintain a long-term Neutral recommendation on the stock. Interpublic Group has a Zacks #4 Rank, which translates into a short-term Sell rating (1-3 months).

 
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