JWT Client Plans to Defect If Ad Agency Is Acquired

One of J. Walter Thompson’s important advertising clients said Thursday that it would take its business elsewhere if the firm is acquired by WPP Group, a fast-growing British marketing services firm.

James DeVoe, advertising vice president for Goodyear Tire & Rubber, said the Akron, Ohio-based company “simply would not feel comfortable working with a firm controlled by interests outside this country.”

WPP Group, a London-based firm that specializes in sales promotions, has offered $45 a share for JWT Group, the parent of J. Walter Thompson and the Hill & Knowlton public relations firm. The acquisition-hungry British firm said it wanted to acquire JWT to expand its advertising and public relations business worldwide.

In New York, JWT said it was reviewing the offer with its investment adviser, Morgan Stanley & Co., and would respond “when we reach a conclusion.”

A spokesman for WPP said the firm was “disappointed they didn’t see fit to come forth and negotiate with us.” The spokesman said that WPP was reviewing its options, which include a tender offer for JWT shares.

JWT has been viewed as a takeover target since January, when Joseph O’Donnell, the head of the J. Walter Thompson agency, delivered an unsolicited buyout proposal from an outside group that would have unseated Don Johnston, JWT chairman and chief executive. Since then, several of JWT’s key executives have been let go.

WPP’s spokesman said the company is talking to former JWT executives but, so far, only Jack E. Peters, the former president and chief operating officer of J. Walter Thompson, has agreed to return to the agency. O’Donnell, who is now chairman and chief executive of the William Esty ad agency, said he hasn’t been approached by WPP and isn’t interested in returning to JWT.

Johnston was unavailable for comment Thursday, but he has previously vowed to keep the firm independent. A JWT spokesman said the firm was looking at all its options, including a management buyout.

In a letter to employees, Johnston asked for their support and told them not to discuss the firm’s affairs with outsiders. “Your best response is to continue to service clients with your full energy and integrity,” he said. “For my part, I am . . . reviewing all the options actively and aggressively.”

JWT shares closed unchanged at $49 Thursday in composite trading on the New York Stock Exchange, as Wall Street awaited the firm’s next move. But one portfolio manager who holds a sizable amount of JWT shares said institutions were inclined to “take their profits and get out.”

With JWT shares trading above the offering price “it doesn’t make sense to wait around for another offer,” the portfolio manager said.

Industry analysts doubted that competing offers for JWT would emerge. They said it was unlikely that another advertising agency would bid for the firm because it would result in conflicts among important clients. These analysts also doubted that JWT, which lost money in the first quarter, could get the financing needed to engineer a management buyout.

Charles G. Crane, an analyst with Prudential-Bache Securities in New York, said he expected JWT to try to hold out for a higher price from WPP Group.

Meanwhile, advertising industry executives said more client defections were possible if the uncertainty about JWT’s future continued. A spokesman for Ford Motor Co., a JWT client for 42 years, said the automobile maker was “watching the situation closely” but hadn’t come to any decision.

Thompson’s list of clients includes Kraft, Ford, Kellogg, Eastman Kodak and other large corporations. Advertising Age, a trade publication, has reported that Goodyear paid Thompson $46.5 million for advertising services last year.

“I imagine there are a lot of clients who are shaken by this and are quietly reassessing what they will do,” said Edward H. Meyer, chairman and president of Gray Advertising in New York.

In an effort to assuage clients’ concerns, WPP issued a statement asking JWT clients to “reserve judgment on our proposal.” The group said it intends to “maintain the organization and people whose creative talents are so important to JWT clients.”

Meyer, the Grey Advertising chairman, called the $45-a-share offer by WPP a “full price.” He said: “The only way they can justify that price is to sharply improve profits, and that’s a problem in the service business. Part of that can be achieved through efficiency. But part of that comes from reducing the amount of service you produce for your client, and that’s the problem.”

Martin S. Sorrell, chief executive of WPP Group, is known in the industry as a financial man. As finance director of the British agency Saatchi & Saatchi, he helped expand the firm internationally through mergers and acquisitions--a growth strategy that he continues to follow at WPP Group.

Before he came to WPP in 1985, the firm was primarily a manufacturer of shopping carts known as Wire & Plastic Products. Through acquisitions, Sorrell transformed the company into the second-largest sales promotion firm in Britain. The firm derives 40% of its revenue from its U.S. operations, which include Sidjakov, Berman, Gomez & Co., a San Francisco package design firm acquired in March.

Jerry Berman, creative director at San Francisco firm, said Sorrell’s interest was on the financial side of the business. “There’s been absolutely no interference in the creative side,” he said.