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Two ad agency giants plan international merger

  • Article by: TANZINA VEGA and LIZ ALDERMAN
  • New York Times
  • July 28, 2013 - 11:03 PM

 

Two leading advertising companies, Omnicom Group and Publicis Groupe, announced a merger Sunday that would create the world’s biggest family of agencies, with a stock market value of $35 billion and 130,000 employees.

The combination of Publicis, based in Paris, and Omnicom, based in New York, would supplant the advertising industry leader, WPP of London. Although Omnicom is slightly bigger than Publicis, the deal is designed as a merger of equals, combining companies that had total revenue of $22.7 billion last year. The new company would be called the Publicis Omnicom Group.

In the early going at least, the combined company would have co-chief executives: John Wren of Omnicom and Maurice Levy of Publicis. But after 30 months, Wren, who is 60, would become sole chief executive and Levy, 71, would be nonexecutive chairman.

The marriage, if it passes muster with antitrust ­regulators in the United States and Europe, and is given the French government’s blessing, would bring together separate networks of ad agencies — including BBDO, TBWA and DDB under Omnicom, and Leo Burnett and Saatchi & Saatchi under Publicis. Collectively, the conglomerates represent some of the world’s largest brands, including AT&T, Visa and Pepsi at Omnicom and McDonald’s, Coca-Cola and Wal-Mart at Publicis.

Minneapolis agency Martin Williams Advertising, which created the “It’s the Cows” ads for Kemps, has been part of Omnicom’s TBWA unit since 1998.

Levy and Wren kicked off a heavily attended press briefing by signing the deal under a bright Parisian sun on the roof of the Publicis headquarters on the Champs-Élysées, with the Arc de Triomphe looming in the background.

“Voilà!” Levy exclaimed with the flourish of his pen.

Shareholders of each of the companies will hold 50 percent of the equity in the new company, which will be listed on the New York Stock Exchange, Euronext Paris and included in the S&P 500 and CAC 40. There will be a single board of directors that will include Wren and Levy and seven representatives from each of the two merging companies.

Profiting from ‘Big Data’

In a statement, Levy cited technological advancements in advertising and the rise of so-called Big Data — the ability to amass larger volumes of consumer information and make money from it in various ways — as reasons for the merger.

“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 behavior,” he said. “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 analog and digital services.”

At the news conference, he elaborated: The “billions of people” who are now online and providing data to companies, Levy said, provide an opportunity to use advertising technologies to “crunch billions of data in order to come with a message which is relevant to a very narrow audience.”

Wren also stressed the importance of digital technology to advertising’s future. “Everything three years from now is going to be digital,” Wren said. “Everything that we do, even billboards nowadays are digital or become digital.”

Omnicom, which analysts say has so far focused more on expanding its digital operations organically as opposed to acquisitions, stands to benefit from the media-buying power of the Starcom MediaVest Group, a division of Publicis that is one of the largest media agencies in the world.

In April, Starcom signed a multiyear deal with Twitter to combine some of the resources that they both use for measuring and tracking data and advertising. That deal was estimated to be hundreds of millions of dollars.

The new company will dethrone WPP from the top spot as the largest advertising company in the world. Levy and Martin Sorrell, the chief executive of WPP have been public rivals for years.

Asked Sunday what a combined Publicis Omnicom would mean for WPP, Levy said Sorrell would continue to be “a very strong competitor.”

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