Omnicom, Publicis in €26.5 billion ad merger

Following a day of speculation, communications and advertising companies Omnicom Group and Publicis Groupe have confirmed what they describe as a “merger of equals” to create Publicis Omnicom Group, a best-in-class communications, advertising, marketing and digital services company. The new company will have a combined market capitalisation of $35.1 billion/€26.5 billion.

In a joint statement, Omnicom CEO John Wren and Publicis Groupe CEO Maurice Lévy – who will become co-CEOs, said: “For many years, we have had great respect for one another as well as for the companies we each lead. This respect has grown in the past few months as we have worked to make this combination a reality. We look forward to co-leading the combined company and are excited about what our people can achieve together for our clients and our shareholders.”

The pair say the merged group of more than 130,000 employees will be exceptionally well positioned to serve clients’ evolving needs, helping them to build their brands and grow their businesses in the rapidly changing communications landscape.

The combination, which has been unanimously approved by the Boards of Directors of both companies, brings together the most extensive portfolio of best-in-class agencies offering clients the industry’s leading talent across disciplines and geographies. Publicis Omnicom Group will include such iconic agency brands as BBDO, Saatchi & Saatchi, DDB, Leo Burnett, TBWA, Razorfish, Publicis Worldwide, Fleishman-Hillard, DigitasLBi, Ketchum, StarcomMediaVest, OMD, BBH, Interbrand, MSLGROUP, RAPP, Publicis Healthcare Communications Group (PHCG), Proximity, Rosetta, CDM, ZenithOptimedia and Goodby, Silverstein & Partners, to name just a few.

According to Lévy, the communication and marketing landscape has undergone dramatic changes in recent years including the exponential development of new media giants, the explosion of Big Data, blurring of the roles of all players and profound changes in consumer behaviour. “This evolution has created both great challenges and tremendous opportunities for clients. John and I have conceived this merger to benefit our clients by bringing together the most comprehensive offering of analogue and digital services. Equally important, it will offer our talented people new avenues for growth and success at the crossroads of strategic intelligence, creativity, science and technology.”

Wren said that both he and Lévy believed the new company reflected their vision of retaining the best talent, attracting an incredible roster of clients and leading innovation. “Omnicom and Publicis Groupe are reshaping the industry by setting a new standard for supporting clients with integrated messaging across marketing disciplines and geographies. This combination will enable us to leverage the skills of our exceptionally talented people, our broad product offering, enhanced global footprint, and tremendous roster of global and local clients. In short, we believe this is a merger that will set our new company on a path to accelerated growth, with long-term benefits for clients, employees and shareholders.”

Lévy and Wren will lead the company as co-CEOs through an initial integration and development period of 30 months, following which Lévy will become non-executive Chairman and Wren will continue as CEO. The company will have a single-tier board with 16 members, consisting of the two co-CEOs and seven non-executive directors from each company.

The transaction is expected to create significant value for shareholders. The new company’s broader portfolio of agencies and services and deeper geographic footprint will allow the combined company to accelerate revenue growth and create operating synergies. The future scalability and internal synergies of the combined company are expected to generate efficiencies of $500 million/ €377 million.

The transaction is a cross-border merger of equals under a holding company, Publicis Omnicom Group, in The Netherlands. The Group’s operational head offices will continue to be based in Paris and New York. The merger is expected to be tax-free to the shareholders of both companies.

The transaction is subject to approval by the shareholders of both companies as well as numerous regulatory approvals. It is expected to close in the fourth quarter of 2013 or the first quarter of 2014.

The proposed merger is likely to be closely scrutinised in both Europe and the US, given the companies’ overlap and potential market share. According to data compiled by Advertising Age, the combination spent $3.34 billion in media placements for clients in 2012, representing 41 per cent of total spending by the top 10 media agencies in the world. WPP registered 32 per cent at $2.6 billion.

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