Publicis and Omnicom have announced merger plans to create the world's biggest advertising group, worth $35.1 billion, a tie-up that could put pressure on rivals to do deals to keep pace. The transaction marks a return of jumbo-sized M&A among the world's 'Big Six' advertising groups, which have spent the past few years buying up much smaller targets in emerging markets and among web marketing specialists.
The French and US company presented the deal as a "merger of equals" in which Publicis and Omnicom shareholders will each hold about 50 percent of the new company's equity. Publicis said the transaction was expected to create "significant value for shareholders", with expected synergies of $500 million. The merged group would keep its head offices in Paris and New York, it said.
"(Omnicom head John Wren) and I have conceived this merger to benefit our clients by bringing together the most comprehensive offering of analog and digital services," Publicis Chief Executive Maurice Levy said in a statement. Levy also said the French government was supportive of the merger.
The deal is likely to push the remaining advertising agencies to consider mergers to keep up. Current leader WPP may make a move for US-based Interpublic, France's Havas or Japan's Dentsu, said Pivotal Research analyst Brian Weiser in a note.
"What would have been unthinkable previously would now make sense," he said.
Together, Publicis and Omnicom had combined 2012 revenue of $22.7 billion, with more than 130,000 employees, and they would overtake WPP, worth $24.1 billion.
The deal would bring together Publicis brands such as Saatchi & Saatchi and Leo Burnett with Omnicom's BBDO World-wide and DDB World-wide.
Wren and Levy will be joint CEOs for an initial integration and development period of 30 months, after which Levy will become non-executive chairman and Wren sole CEO, Publicis said. Publicis shareholders will receive one newly-issued ordinary share of Publicis Omnicom Group for each Publicis share they own, plus a special dividend of 1.00 euro per share.