JAPANESE AD giant Dentsu is buying marketing group Aegis for £3.2 billion, the biggest deal in its history as it seeks to expand outside its home market with the British firm’s European and digital business.
Revealing how badly Dentsu needs growth outside its shrinking home market, it will pay a 48 per cent premium to secure the takeover after European groups WPP and Publicis snapped up rival agencies in recent years.
The price represents 20 times full year 2012 expected price earnings, compared with the 10-11 times at which WPP and Publicis trade, said analyst Ian Whittaker at Liberum Capital.
The deal means Japan is the second most active overseas acquirer this year with more than $20 billion worth of deals, behind the US but surpassing all major European nations and China in outbound MA.
Analysts described the deal as a perfect strategic fit after Aegis’s chief executive, Jerry Buhlmann, managed to turn the group around to grow in Asia Pacific, the United States, emerging markets and digital marketing in recent years.
“The quality of the offer, the strong likelihood of deal certainty, the fact the offer was cash and the fact it was a meaningful serious approach meant that we entered bilateral discussions with them,” Buhlmann said of Dentsu’s approach.
Aegis, which has Coca-Cola, GM and Disney on its client list, has long been seen as a potential takeover target, although it had for years been linked to the French group Havas as French financier Vincent Bolloré was the largest shareholder in both.
Aegis has performed strongly since selling its Synovate market research unit last year to focus on the faster growth areas of media buying and selling and digital communications.
In 2011, the group increased the proportion of its revenues from digital to a sector-leading 35 per cent.
Analysts said the deal underlined the value present in advertising companies despite a tough economic climate and could lift the whole sector.
For Dentsu, the deal enables it to find new growth outside its home market, which is eroding.
