Seneca Investments' proposal to acquire struggling e-services company Organic could be more evidence its parent company Omnicom Group is attempting to recoup investments in the failing e-services sector.
Seneca is part of Omnicom's Communicade division, which holds minority interests in several interactive media agencies, including San Francisco's Organic and Red Sky Interactive, New York's Agency.com and Razorfish, and Miami's Answerthink.
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Seneca already owns 22 percent of Organic's shares and is proposing to purchase an additional 58 percent of Organic's outstanding shares for 33 cents apiece. Organic closed last Wednesday at 29 cents per share and has nearly 90 million shares outstanding.
Based on an earn-out formula, the purchase price for shares acquired from the company's majority stockholders would be $5.9 million, with an additional $10 million to be paid under certain conditions, including substantial improvements in operational results.
Seneca would pay 33 cents per share to Organic stockholders other than majority stockholders. That amount doesn't include any payouts that would result from the earn-out feature.
In a statement, Organic CEO Mark Kingdon said the proposal has been forwarded to a special committee for review. He did not return calls for comment.
Meanwhile, Seneca is moving forward with a leveraged buyout of Agency.com.
Chan Suh, CEO of Agency.com, said last week the deal should be completed next month. Suh also said Agency.com will close its office in Portland, Ore., and lay off 200 employees.
The moves make a lot of sense, given current market conditions, said Christine Overby, market analyst at Forrester Research. "It's been a long time coming," she said.
Omnicom is a holding company with interests in advertising, marketing services, interactive/digital media, specialty communications and media buying services.
"[Omnicom is] obviously taking a look at those assets and realizing they can acquire [outright] what they've got relatively cheaply," said David Rauktys, financial analyst at FAC/Equities. "Once [Organic is] acquired, [Omnicom] could potentially fold them into one of the Omnicom advertising networks."
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