Omnicom-Publicis 35-bn mega-merger hits roadblock

The $35-billion trans-Atlantic mega-merger between Omnicom Group and France's Publicis Groupe SA to create the world's largest advertising company has hit roadblocks over disagreements on terms of the deal, The Wall Street Journal yesterday reported, citing people with knowledge of the situation.

Both company had in late 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)

Although it was announced as a merger of equals, both companies have not agreed on who would be the legal acquirer, and who would hold key posts in the merged company, the report said.

Since one company has to be an acquirer for accounting purposes, crucial paperwork is being delayed with the US Securities and Exchange Commission, the report added.

The delays have led to Omnicom and Publicis stop meetings of as many as 70 integration committees, where they mutually present their networks, teams, organisation, the report said.

The companies are also at disagreement over filling top slots, particularly the position of finance chief. While Omnicom is pushing for its chief financial officer, Randall Weisenburger, Publicis wants its CFO, Jean-Michel Etienne, to be appointed as the CFO.

Legal and tax issues are also complicating the merger. As per the agreed merger terms, the new holding company is to be based in the Netherlands, with operating offices in Paris and New York. But now the two want the company headquarters located in the UK for tax purposes.

Both companies had expected the deal to close by the first quarter of 2014, but that is unlikely to happen since the deal is yet to be approved by regulators in China, which is a big market for Publicis.

The deal would now also require approvals from the revenue and customs authority in the Netherlands, as well as the UK where the new company will be headquartered. They would also need tax approval from France.

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.

If the deal goes through, the new company would be the world's largest advertising company with a market cap of approximately $35.1 billion.