MDC Partners, Inc. (USA) (MDCA)

fcfroic (39.26) Submitted: 1/22/08 11:16 AM : Start Price: $9.25 MDCA Score: -32.98

MDCA is basically a financier of advertising and marketing agencies. This is not dissimilar to the UAM or the Affiliated Managers model of buying investment management companies. It has recently stepped up its ownership in its largest, Crispin Porter and Bogusky to 77% ownership from 50%. Crispin Porter & Bogusky is one of the largest and hottest independent ad agencies in the US with a client list that includes Burger King, Volkswagen, Nike running shoes and Domino's Pizza. CPB (alone) should generate over $135mm in revenue and $30mm in EBITDA in 2008, with revenue and EBITDA both growing by around 25% in 2008. MDC's ownership stake of CPB could be worth more than the $250mm equity market capitalization of MDCA today.

The company's balance sheet has a significant amount of debt which is being paid down. Debt covenants preclude the company from undertaking share repurchases at this time but free cash flow is becoming substantial.

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