Omnicom, Publicis call off $35 billion merger
09 May 2014
The much-hyped $35 billion merger between two advertising giants, Omnicom Group and Publicis Groupe SA, fizzled out after both called off the deal since integrating the two transatlantic companies was far too complex.
US-based Omnicom and France-based Publicis had, in July last year, agreed to merge in an all-stock transaction to create the world's largest company providing communications, advertising, marketing and digital services, with combined revenues of $22.7 billion. (See: Publicis, Omnicom merging to create an advertising powerhouse)
Both companies said in joint statement that they have terminated their proposed merger in view of difficulties in completing the transaction within a reasonable timeframe.
"The challenges that still remained to be overcome, in addition to the slow pace of progress, created a level of uncertainty detrimental to the interests of both groups and their employees, clients and shareholders. We have thus jointly decided to proceed along our independent paths. We, of course, remain competitors, but maintain a great respect for one another," said, Maurice Lévy, chairman and CEO of Publicis, and John Wren, president and CEO of Omnicom.
Both companies did not say what the difficulties were at completing the merger, but The Wall Street Journal last month reported that the mega deal had hit roadblocks on disagreements over several issues. (See: Omnicom-Publicis 35-bn mega-merger hits roadblock)
Although it was announced as a merger of equals, both companies had not agreed on who would be the legal acquirer, and who would hold key posts in the merged company.
Since one company has to be an acquirer for accounting purposes, crucial paperwork is being delayed with the US Securities and Exchange Commission.
The delays had led to Omnicom and Publicis stop meetings of as many as 70 integration committees, where they mutually present their networks, teams, organisation, according to the Journal.
The companies were also at disagreement over filling top slots, particularly the position of finance chief. While Omnicom was pushing for its chief financial officer, Randall Weisenburger, Publicis wanted its CFO, Jean-Michel Etienne, to be appointed as the CFO.
Legal and tax issues were also complicating the merger. As per the agreed merger terms, the new holding company was to be based in the Netherlands, with operating offices in Paris and New York. But later both companies wanted the new headquarters located in the UK for tax purposes.
Omnicom, the world's second-largest advertising firm, has clients like PepsiCo Inc, Nissan Motor Co and Royal Philips Electronics NV, among others of similar stature as its clients, and some accounts that overlap with Publicis, such as McDonald's Corp and Procter & Gamble Co.
Publicis, the third-largest advertising firm, has a large portfolio of digital assets that includes Digitas, LBi International and Razorfish, a client list that has Bank of America Corp, Coca-Cola Co and BMW AG, as well as some of the emerging market agencies.
Like the WPP Group, both Publicis and Omnicom have grown through consolidation over decades as they vie with each other for accounts.
Publicis and Omnicom together spent about $3.34 billion, or roughly 41 per cent of the total spending by top 10 advertising agencies in media placements for clients, according to data compiled by Advertising Age last year. Against this, WPP accounted for $2.6 billion or 32 per cent of the total media spending.
