The bank said it was worried that senior management will lose focus of the day-to-day running of the agency business.
Last month, Havas announced that it was to scrap its global Diversified Agencies Group, home to agencies including Brann and ehsrealtime, resulting in departure of Jean-Michel Carlo, its chairman and chief executive.
The network said it was looking at ways to integrate its agencies from DAG into its Arnold, Media Planning Group and Euro RSCG divisions. Brann has been told that it will become part of one or the other, with insiders tipping Euro RSCG and a merger with ehsrealtime.
Merrill Lynch downgraded its recommendation of the network forcing Havas shares, listed on the Paris Bourse, down by 4.7% this afternoon, to £5.30. Yesterday, they closed at £5.55. Merrill Lynch reduced its recommendation from a "buy" to "accumulate".
The bank has also reduced forecasts for Havas's earnings per share for 2001 by 8% to 20p.
At the beginning of October, Havas revealed a one-off loss of £4.3m for the first half of 2000. At that time, CEO Alain de Pouzilhac warned that the company, owner of the Euro RSCG advertising network, faced a tough second half of the year.
Shares in the firm have recovered some of their value, after hitting a low of £3.26. However, they have been valued as high as £12.07 this year.
In September, Havas withdrew its £425m bid for Tempus leaving the way open for WPP.
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