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Interpublic to Acquire Acxiom Marketing Solutions for $2.3B

Zacks Equity Research
Updated

The Interpublic Group of Companies, Inc. IPG yesterday announced that it has inked a deal to purchase the Acxiom Marketing Solutions (AMS) business from Arkansas-based database marketing company — Acxiom Corporation ACXM. AMS is engaged in delivering data-related and analytical services.

The deal has already received approval from the board of directors of both the companies. Subject to Acxiom shareholders’ approval and other customary regulatory approvals, the buyout is expected to close by the end of 2018.

Deal Details and Expectations

The buyout will involve integration of AMS' expertise in data management with Interpublic’s media, creative, marketing services and analytics capabilities, global scale as well as consumer insights.

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The transaction is set at $2.3 billion in cash or $2.0 billion in net after considering an acquisition-related benefit from the tax step-up. The value of the deal is equivalent to 11.5 times of AMS’ expected 2018 EBITDA (inclusive of the tax step-up benefit).

The acquisition is expected to be accretive to Interpublic’s adjusted earnings per share (EPS) in the year, after the deal closes. AMS will account for almost 8% of the combined entity`s revenues. Meanwhile, Acxiom expects to receive nearly $1.7 billion of net cash proceeds (assuming full payout of taxes and fees) from the sale. Acxiom plans to use the proceeds of the sale to invest in strategic growth opportunities, acquisitions, clearing off existing debt and rewarding shareholders through buybacks and cash tender initiation.

On completion, Dennis Self and Rick Erwin will continue to serve as the co-presidents of AMS. The proposed deal does not include the takeover of LiveRamp business of Acxiom, which was acquired in 2014 for around $310 million.

A glimpse at Interpublic’s price trend reveals that the stock has had an impressive run on the bourse on a year-to-date basis. The company’s shares have returned 14.2%, against the industry’s fall of 5.6%.

 

IAN Segment Likely to Benefit

Post deal closure, AMS will be aligned with IPG Mediabrands and operate as a stand-alone division.  Since IPG Mediabrands operates under Interpublic’s Integrated Agency Networks (IAN) segment, the deal is expected to boost the IAN segment. Revenues from the IAN segment contributed the largest chunk (around 84%) to Interpublic’s first-quarter 2018 net revenues. Revenues in this segment improved 6.5% year over year to $1.48 billion.

Given strong demand for data-integrated and analytical services, we believe that Interpublic’s decision to acquire AMS is a prudent business move. Enhanced and innovative data-led offerings should strengthen the company’s market position and create more growth opportunities that will boost the top and the bottom line.

Zacks Rank & Stocks to Consider

Currently, Interpublic is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few better-ranked stocks in the broader Business Services sector include Automatic Data Processing, Inc ADP and The Dun & Bradstreet Corporation DNB). Both the stocks carry a Zacks Rank #1 (Strong Buy).

The long-term expected EPS (three to five years) growth rate for Automatic Data Processing and Dun & Bradstreet Corporation are 11.3% and 6%, respectively.

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Dun & Bradstreet Corporation (The) (DNB) : Free Stock Analysis Report
 
Acxiom Corporation (ACXM) : Free Stock Analysis Report
 
Interpublic Group of Companies, Inc. (The) (IPG) : Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report
 
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