Interpublic Group (NYSE:IPG) is planning to sell its digital marketing agency, R/GA, to Indian IT and consulting giant Tata Consultancy Services (TCS), the Wall Street Journal reported. While the terms of the deal are not disclosed, the report suggests that R/GA could be valued at around $300 million.
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Interpublic Group is a global advertising and marketing services company. R/GA has been a part of Interpublic since 2001, following Interpublic’s acquisition of its parent company, True North Communications.
The report also noted that IPG and TCS have discussed a broader strategic partnership. This could include collaboration on AI and data analytics projects for shared clients.
Why Is IPG Selling R/GA to TCS?
R/GA operates within Interpublic’s Media, Data & Engagement Solutions segment. In the first quarter of 2024, this segment reported consolidated revenue of $961.3 million, reflecting a decline of 0.5% year-over-year. The decrease was due to net client losses in the technology and telecommunications sectors. Moreover, reduced spending from existing clients in the automotive, transportation, and financial services industries remained a drag.
Also, IPG faces several challenges, including global uncertainties and rising inflation. Cost pressures on its key clients in technology and telecommunications have further hurt its financial performance.
In response to the challenges, Interpublic is focusing on high-growth verticals. These include media and performance marketing and integrated healthcare marketing.
Is IPG a Good Stock?
The slowdown in its business keeps analysts sidelined on IPG stock. It has one Buy and four Holds for a Hold consensus rating. IPG stock has lost over 22% of its value in one year. The analysts’ average IPG stock price target is $34.25, implying 17.50% upside potential from current levels.
