Restructuring plan and eyeing emerging markets
Interpublic Group of Companies Inc (NYSE:IPG) issued $300 million of 2.25% senior notes that are due in 2017, and another $500 million of 3.75% senior notes that are due in 2023. These notes will be used to repay $200 million worth of higher-interest-bearing, callable, convertible senior notes at which are due in 2023, and 10% senior notes of $600 million that are due in 2017. The company has the right to redeem the 4.75% notes on or after Mar. 15, 2013 at par with the accrued interest, and the 10% notes at a 5% premium on the principal amount with accrued interest on or after July 15, 2013. This combination of new notes and the company’s plan for redemption of both the 4.75% convertible notes and the 10% senior notes will help it to improve its debts and reduce its interest expenses.
Mullen Advertisement, an independent brand of Interpublic Group of Companies Inc (NYSE:IPG), has created the advertisements for automotive brands like BMW and General Motors Company (NYSE:GM). Currently it has signed a contract with American Honda Motor to run the advertising campaign of Acura, Honda’s luxury brand. In 2011, Honda spent $1.14 billion for its advertising in the U.S. market. This contract is expected to generate revenue of around $200 million to Mullen. It is the biggest contract for Mullen in its 40 year history. To run this advertising campaign, the company plans to open an office in Southern California. Honda is rolling out a number of new products as well which will be coming soon. The launch of new products by Honda will lead Mullen to gain more advertising contracts to promote them in future.
Decent dividend growth
In the last 10 years, Omnicom Group Inc. (NYSE:OMC) has distributed around 99% of its net income to its shareholders through dividends and share repurchases. It has recently declared the dividend of $0.40 for the second quarter, or $1.60 on an annualized basis which will be payable on July 11, 2013, witnessing a rise of 33.33% year-over-year. In 2012, it increased the dividend to $1.20 per share, compared to $1.00 in 2011. The continuous increase in dividend payout shows that the company is concerned about investor returns. With a strong cash balance of $2.24 billion as of March 2013, it also shows that the company has the capability to continue its dividend payments in future as well.
The joint venture between Omnicom Group Inc. (NYSE:OMC)’s Goodby Silverstein & Partners and the McCann network group of Interpublic Group of Companies Inc (NYSE:IPG) ended in March 2013. This joint venture was known as “Commonwealth” and was formed to run an advertising campaign for General Motors Company (NYSE:GM)’s Chevrolet brand. Now McCann has taken full ownership of the venture. Omnicom Group Inc. (NYSE:OMC)’s loss from this split-up is estimated to be around $35 million, reducing its organic growth by 0.2% which will be reflected in the next quarter earnings. However, management is confident in Goodby’s abilities to gain new contracts from its customer relationship management network. The company is also optimistic about receiving new contracts of advertisement campaigns from automakers for the promotion of their new model launches.
The company has a strong cash balance of $2.24 billion and is looking for acquisitions in emerging markets to enhance its presence globally. This will help it in gaining new auto advertising contracts in the future.
Conclusion
Looking at the acquisitions done by the WPP, the company is strengthening its digital segment with increasing presence in emerging markets. It is also anticipating a rise in revenue from the FIFA world cup 2014 and Olympics 2016.
IPG’s senior note restructuring will reduce the company’s interest burden, and the contract from Honda Motors to run the Acura advertising campaign will increase its net margins.
Omnicom Group Inc. (NYSE:OMC), with its strong cash balance, is increasing its dividend payouts and is also optimistic about gaining new auto advertising contracts in the future. The company is also looking to enhance its footprints in emerging markets using some of its cash.
I recommend buying all three stocks.
The article 3 Media Companies to Look For originally appeared on Fool.com.
Madhu Dube has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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