The agreement was formally announced at a press conference in Paris last night. Called Publicis Omnicom Group, the new company will be the world's largest ad and marketing group by revenue, surpassing Sir Martin Sorrell's WPP as the No. 1 network.
The new group, whose capital will be split 50-50 between the shareholders of the two companies, combines the current second- and third-largest advertising firms, putting their combined market capitalisation at about $US35.1 billion and combined 2012 revenue at $US22.7 billion.
It will initially be co-directed by the current chief executives, Maurice Levy of Publicis and John Wren of Omnicom.
“For many years, we have had great respect for one another as well as for the companies we each lead,'' Levy and Wren said in the statement. “This respect has grown in the past few months as we have worked to make this combination a reality.”
The merger has been unanimously approved by the boards of directors of both companies with a combined workforce of more than 130,000.
A combined firm would gain greater pricing power with clients and media owners, all but guaranteeing the deal will face regulatory hurdles in the US and Europe.
Both firms own major creative, media, branding and public relations agencies in the local market, potentially creating client conflicts under the merger. Cost savings would almost certainly result from centralisation of administration functions.
Most of Madison Avenue's famous names have an Australian presence. Publicis's Saatchi & Saatchi and Leo Burnett would find themselves under the same Australian corporate umbrella as TBWA, DDB and BBDO.
One of the most contentious client conflicts globally would be in the soft drinks market, with Leo Burnett handling Coca-Cola, and Omnicom's TBWA working on Pepsi.
Omnicom is listed on the New York Stock Exchange, while Publicis is listed on Euronext. The transaction is a cross-border merger of equals under a holding company, Publicis Omnicom Group, in The Netherlands and the group's operational headquarters will remain based in Paris and New York. The combined company is expected to be listed on the New York Stock Exchange and Euronext Paris, and included in the S&P 500 and CAC 40.
The move comes after observers predicted a dramatic period of consolidation among the world's largest ad groups to achieve efficiencies and drive growth in a business becoming increasingly globalised.
Ad networks are also feeling the pinch in the US and Europe, where conditions are flat. Consolidation is being driven by growth opportunities in emerging markets such as Brazil, Russia, India and China and Latin America to offset weak growth elsewhere.
Japanese-owned Dentsu was the first out of the starting blocks, last year agreeing on a $4.94bn takeover of Aegis Media, in which Australian media figure Harold Mitchell is the second-largest shareholder.
The Publicis-Omnicom deal may spark further consolidation among the remaining global advertising networks that have a local presence. Aegis Media has been linked with French-owned Havas in the past.
Commenting on the new advertising environment last night, Levy said that “the communication and marketing landscape has undergone dramatic changes in recent years including the exponential development of new media giants... and profound changes in consumer behaviour".
“John and I have conceived this merger to benefit our clients by bringing together the most comprehensive offering of analogue and digital services,'' he added.
The new group expects to achieve savings of $US500 million, one aspect of the merger that drew immediate reaction from the main French CGT union which called the merger “senseless''.
The economies of scale that this merger will mean “lay-offs'' and “restructuring'' for the workers, the CGT said in a statement, adding a call for the government to intervene.
Source:http://www.theaustralian.com.au/media/publicis-omnicom-merger-to-form-us35bn-advertising-giant/story-e6frg996-1226687255255
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