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| Advertising Giants Announce $35.1 Billion Merger | Advertising Giants Announce $35.1 Billion Merger |
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| Two leading advertising companies, Omnicom Group and Publicis Groupe, announced a merger on Sunday that would create the world’s biggest family of agencies, with a stock market value of $35.1 billion and 130,000 employees. | Two leading advertising companies, Omnicom Group and Publicis Groupe, announced a merger on Sunday that would create the world’s biggest family of agencies, with a stock market value of $35.1 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 shaped 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 Lévy of Publicis. But after 30 months, Mr. Wren, who is 60, would become sole chief executive and Mr. Lévy, 71, would be nonexecutive chairman. | |
| The marriage, if it passes muster with antitrust regulators in the United States and Europe, and is given the blessing of the French government, would bring under one roof 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 Walmart at Publicis. | |
| Mr. Lévy and Mr. Wren opened a heavily attended news conference 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!” Mr. Lévy exclaimed with the flourish of his pen. | |
| Shareholders of each company 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 Standard & Poor’s 500-stock index and the CAC 40 in Paris. A single board of directors will include Mr. Wren and Mr. Lévy and seven representatives from each of the two merging companies. | |
| In a statement Mr. Lévy 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.” | “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 expanded on that notion. The “billions of people” who are now online and providing data to companies,” Mr. Lévy 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.” | At the news conference, he expanded on that notion. The “billions of people” who are now online and providing data to companies,” Mr. Lévy 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.” |
| Mr. Wren also stressed the importance of digital technology to advertising’s future. “Everything three years from now is going to be digital,” Mr. Wren said. “Everything that we do, even billboards nowadays are digital or become digital.” | Mr. Wren also stressed the importance of digital technology to advertising’s future. “Everything three years from now is going to be digital,” Mr. 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 through 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. | Omnicom, which analysts say has so far focused more on expanding its digital operations organically as opposed to through 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. |
| Last year, revenue at Publicis increased nearly 14 percent to $8.8 billion, while revenue at Omnicom increased 2.5 percent to $14.2 billion. | Last year, revenue at Publicis increased nearly 14 percent to $8.8 billion, while revenue at Omnicom increased 2.5 percent to $14.2 billion. |
| The new company will dethrone WPP from the top spot as the largest advertising company in the world. Mr. Lévy 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, Mr. Lévy said Mr. Sorrell would continue to be “a very strong competitor.” | |
| “We respect WPP enormously,” Mr. Lévy said. “We do not define our strategy in regard to what he will think or what he will do,” he said, referring to Mr. Sorrell. | “We respect WPP enormously,” Mr. Lévy said. “We do not define our strategy in regard to what he will think or what he will do,” he said, referring to Mr. Sorrell. |
| At least one competitor was willing to comment Sunday — if only to deride the merger strategy. David Jones, the chief executive of Havas, a competing French advertising holding company, referred the deal as “an industrial merger in the digital age.” | |
| “Clients today want us to be faster, more agile, more nimble and more entrepreneurial — not bigger and more bureaucratic and more complex,” Mr. Jones said in a statement. | “Clients today want us to be faster, more agile, more nimble and more entrepreneurial — not bigger and more bureaucratic and more complex,” Mr. Jones said in a statement. |
| Mr. Jones said the advertising industry’s “obsession with mergers and acquisitions” was out of sync with how the other tech companies operate. “The industry’s obsession with mergers and acquisitions still amazes me particularly in a world where digital and technology have made scale irrelevant.” | Mr. Jones said the advertising industry’s “obsession with mergers and acquisitions” was out of sync with how the other tech companies operate. “The industry’s obsession with mergers and acquisitions still amazes me particularly in a world where digital and technology have made scale irrelevant.” |
| He noted that the photo-sharing service Instagram has 32 employees, but 140 million users. Facebook, he said, has but 5,000 employees supporting 1 billion users. “In a people business, mergers and acquisitions rarely create value in the way they do in industrial businesses,” Mr. Jones said. | He noted that the photo-sharing service Instagram has 32 employees, but 140 million users. Facebook, he said, has but 5,000 employees supporting 1 billion users. “In a people business, mergers and acquisitions rarely create value in the way they do in industrial businesses,” Mr. Jones said. |
| Some analysts wondered whether the United States Justice Department would approve such a merger or whether the French government would bristle at a company that was not solely run by a French national. | Some analysts wondered whether the United States Justice Department would approve such a merger or whether the French government would bristle at a company that was not solely run by a French national. |
| In a report issued Saturday as word of the merger was circulating, Brian Wieser, a senior research analyst at Pivotal Research Group, wrote that antitrust concerns could be eased if the new company positioned itself less as a conglomerate of ad agencies and more of a data company competing with businesses like I.B.M. and Facebook. | In a report issued Saturday as word of the merger was circulating, Brian Wieser, a senior research analyst at Pivotal Research Group, wrote that antitrust concerns could be eased if the new company positioned itself less as a conglomerate of ad agencies and more of a data company competing with businesses like I.B.M. and Facebook. |
| It was not immediately clear what position President François Hollande’s government might take on the merger. Calls to Élysée Palace over the weekend were not returned. Publicis is considered a French national champion, and French officials have been active during Mr. Hollande’s tenure about protecting its business icons from foreign dominance. | It was not immediately clear what position President François Hollande’s government might take on the merger. Calls to Élysée Palace over the weekend were not returned. Publicis is considered a French national champion, and French officials have been active during Mr. Hollande’s tenure about protecting its business icons from foreign dominance. |
| But at the news conference on Sunday, Mr. Lévy said the companies informed the French government of their plans on Saturday and had received “tremendous support” from officials. “We are in private hands,” Mr. Lévy said. “We are not owned by the French government, yet we are one of the iconic companies in France.” | |
| He said the new holding company would be registered in the Netherlands but would keep the headquarters in both Paris and New York to avoid the impression that Publicis would be “swallowed” by an American company — something that would not have been accepted in France. | He said the new holding company would be registered in the Netherlands but would keep the headquarters in both Paris and New York to avoid the impression that Publicis would be “swallowed” by an American company — something that would not have been accepted in France. |
| Mr. Wren said the company would still require clearance from a number of other countries. “There will be different issues in a few areas,” Mr. Wren said. “We’re not expecting anything that will prevent this at this point. There’s a lot of competition out there at any level.” | |
| The executives said they hoped the deal would be completed later this year, or early next, depending on the regulatory approvals. | The executives said they hoped the deal would be completed later this year, or early next, depending on the regulatory approvals. |
| Earlier this year, France’s industrial renewal minister, Arnaud Montebourg, scuttled a deal by Yahoo to take a 75 percent stake in DailyMotion, a French Web video start-up in which the government holds a 27 percent share. Warning that Yahoo would “devour” DailyMotion, he insisted that Yahoo reduce its stake to 50 percent, causing Yahoo to walk away. | |
| But Mr. Lévy might be in a better position to finesse any government resistance to loss of a national icon. He is one of the best-connected businessmen in France and has cultivated relationships with each administration since he joined Publicis in 1987. | |
| Despite his clout, Mr. Lévy has been a controversial figure to the French public, coming under fire for receiving multimillion-euro pay packages that are among the highest of any French executive. His pay — 16 million euros last year — was a flash point during the 2012 presidential elections, when Mr. Hollande slammed what he called excessive executive pay and called on the rich to pay more taxes. | |
| On Sunday, Mr. Lévy and Mr. Wren said their deal sprung from a casual conversation six months ago during a social encounter. Then on further reflection, Mr. Lévy joked, “it looked like it was not that stupid after all.” | |
Liz Alderman reported from Paris. | Liz Alderman reported from Paris. |