Publicis and Omnicom have unveiled plans to merge in a $35.1 billion (£22.8bn) deal that will see them overtake British rival WPP to create the world’s largest advertising group.
The deal has been presented as a “merger of equals” in which shareholders of France’s Publicis and US group Omnicom will each hold about 50 per cent of the enlarged entity.
Publicis said the tie-up would create “significant value for shareholders”, with expected savings of $500 million. The merged group will keep its head offices in Paris and New York.
Maurice Levy, the French group’s chief executive, said he and Omnicom head John Wren “have conceived this merger to benefit our clients by bringing together the most comprehensive offering of analogue and digital services”.
Wren said: “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.”
Analysts said the deal is expected to prompt rival agencies to consider mergers to keep up. Brian Weiser at Pivotal Research said current market leader WPP may decide to make a move for US-based Interpublic, France’s Havas or Japan’s Dentsu.
Weiser added: “What would have been unthinkable previously would now make sense.”
However, the chief executive of Havas had earlier questioned the logic of the merger, saying digital business and technology had made scale irrelevant, and that the uncertainties associated with large mergers would distract staff away from clients.
David Jones said: “I’m not sure this is in the best interests of their clients or their talent. Clients today want us to be faster, more agile, more nimble and more entrepreneurial, not bigger and more bureaucratic and more complex.”
His views were echoed by Andy Collins, senior partner at mergers and acquisitions adviser Results International. He said: “Client conflict will be a massive issue and the challenges of putting the groups together, and the disruption this will cause, is not to be underestimated.”
Together, Publicis and Omnicom employ more than 130,000 staff and had combined revenues of $22.7bn (£14.75bn) last year. That compares with WPP’s revenues of £10.4bn.
The deal will bring together Publicis brands such as Saatchi & Saatchi – which has devised campaigns for the likes of mobile phone network EE, featuring film star Kevin Bacon – with Omnicom’s DDB Worldwide, creator of last year’s John Lewis snowman Christmas adverts.
Wren and Levy will be joint chief executives for an initial integration and development period of 30 months. Levy will then become non-executive chairman, while Wren will be the sole chief executive.
Publicis shareholders will receive one newly-issued ordinary share of Publicis Omnicom Group for each Publicis share they own, plus a special dividend of €1 (86.3p) per share.
Omnicom shareholders will get 0.813 Publicis Omnicom Group shares for each Omnicom share they hold, together with a special dividend of $2.
The merger, which has been unanimously approved by both firms’ boards, is expected to be completed towards the end of this year, or early next year.