Publicis and Omnicom (OMC) in Late-Stage Merger Talks

By Jeffrey McCracken, Matthew Campbell & Jacqueline Simmons Jul 26, 2013, 5:53 PM 

Publicis Groupe SA (PUB) and Omnicom Group Inc., two of the world’s biggest advertising companies, are in late-stage talks about a combination, said a person with knowledge of the situation.

The deal would be a merger of equals, said the person, who asked not to be named because the deliberations are private. Combined, Paris-based Publicis and New York-based Omnicom would be the largest advertising company in the world, topping current leader WPP (WPP) Plc. The talks could still collapse.

A merged entity would have a market value of more than $30 billion. That size and geographic reach would give the combined entity more heft to negotiate better ad rates for media placements on television, the Internet and in print for its clients. A deal could also act as a hedge against the possibility of losing clients since each holding company owns dozens of ad agencies.

Peggy Nahmany, a spokeswoman for Publicis, didn’t immediately return a call seeking comment. Joanne Trout, a spokeswoman at Omnicom (OMC), declined to comment.

Omnicom advanced 1.3 percent today in New York to close at $65.11. Publicis rose 1.5 percent to 59.35 euros in Paris trading.

Publicis, Omnicom and London-based competitor WPP have all grown through consolidation in recent decades as they vie with each other for accounts. Annual ad spending across the globe may rise 5 percent next year to $543.9 billion, according to ZenithOptimedia, a research firm that’s part of Publicis.

Regulatory Scrutiny

A potential combination also would probably attract regulatory scrutiny in both Europe and the U.S. given the operations’ overlap. A combined Omnicom and Publicis would have spent a total of $3.34 billion in media placements on behalf of clients last year, according to data compiled by Advertising Age. That would have accounted for 41 percent of total spending by the top 10 media agencies in the world. WPP, by contrast, made up 32 percent at $2.6 billion.

Publicis said July 18 that first-half profit rose 15 percent, aided by growth in the U.S. and revenue from digital activities. Net income climbed to 314 million euros ($417 million) from a year earlier, while revenue jumped to 3.35 billion euros, beating analysts’ projections.

Publicis Chief Executive Officer Maurice Levy has spurred growth by acquiring digital ad agencies as well as companies in emerging markets such as China. The company owns the Leo Burnett and Saatchi & Saatchi ad agencies.

Omnicom, led by CEO John Wren, was founded in 1986. It generated more than $14 billion in revenue last year through advertising brands such as BBDO Worldwide.

Courtesy of Bloomberg News

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