Publicis and Omnicom merge to form world's No.1 advertising group

PARIS, France - French group Publicis and its US rival Omnicom announced Sunday the merger of the two advertising giants to form the world leader in the sector, boosting its ability to meet the demands of the digital revolution.

The new group, whose capital will be split 50-50 between the shareholders of the two companies, will be called the Publicis Omnicom Group, combining the current second- and third-largest advertising firms, worth about $35.1 billion (26.5 billion euros), a joint statement said.

It will be initially co-directed by the current CEOs, Maurice Levy of Publicis and John Wren of Omnicom.

"For many years, we have had great respect for one another as well as for the companies we each lead," Levy and Wren said in the statement. "This respect has grown in the past few months as we have worked to make this combination a reality."

The merger has been unanimously approved by the boards of directors of both companies with a combined workforce of more than 130,000.

It will bring together such iconic ad agency brands as Saatchi & Saatchi, Leo Burnett, Razorfish, BBDO, Ketchum, to name a few. Their clients include such major producers as Nike, LVMH, Nestle from Publicis and Volkswagen, Unilever and ExxonMobile from Omnicom.

"This combination will enable us to leverage the skills of our exceptionally talented people, our broad product offering, enhanced global footprint, and tremendous roster of global and local clients," Wren said.

The new group's combined market capitalisation of about $35.1 billion is based on closing prices on July 26. Its combined 2012 revenue amounts to $22.7 billion.

That will push it ahead of the current global advertising leader, the British group WPP.

The merger deal is expected to be finalised by the end of this year or early 2014, with both companies confident of receiving the green light from competition authorities on both sides of the Atlantic.

The digital wave has shaken up the advertising sector with the traditional channels for reaching consumers, such as print publications, up against the rise of online and mobile platforms, including social networks and specific content applications.

Levy reflected that view, saying that "the communication and marketing landscape has undergone dramatic changes in recent years including the exponential development of new media giants... and profound changes in consumer behaviour."

"John and I have conceived this merger to benefit our clients by bringing together the most comprehensive offering of analogue and digital services," he added.

The new group expects to achieve savings of $500 million, one aspect of the merger that drew immediate reaction from the main French CGT union which called the merger "senseless".

The economies of scale that this merger will mean "lay-offs" and "restructuring" for the workers, the CGT said in a statement, adding a call for the government to intervene.

The transaction is a cross-border merger of equals under a holding company, Publicis Omnicom Group, in The Netherlands. The group's operational headquarters will remain based in Paris and New York.

It is expected to be listed on the New York Stock Exchange and Euronext Paris, and included in the S&P 500 and CAC 40.