Media

Merger of advertising giants collapses after takeover claims

Publicis backs out of union with Omnicom after dispute over key staff appointments

Publicis Chief executive Maurice Levy (left) and John Wren, head of Omnicom Group, at a joint signature ceremony in Paris in last July. Photograph: Reuters/Christian Hartmann
Publicis Chief executive Maurice Levy (left) and John Wren, head of Omnicom Group, at a joint signature ceremony in Paris in last July. Photograph: Reuters/Christian Hartmann
Sat May 10 2014 - 01:00

The $35 billion (€25.4 billion) merger of Publicis and Omnicom collapsed after the deal to create the world's largest advertising company started to turn into a takeover by the US group, according to the head of the French group.

Maurice Lévy, chairman and chief executive of Publicis, said John Wren, chief executive of Omnicom, wanted the merged entity to use both his chief financial officer and general counsel, putting the key roles in the hands of the US company, which would have been unacceptable.

'Turned in his grave'

“When we have an agreement, we have to keep it,” Mr Lévy said in an interview. “We thought that maybe it is much better to stop before going to the church.”

Speaking on French television earlier, he said Publicis founder Marcel Bleustein-Blanchet would have “turned in his grave” at the prospect of a takeover and that the company would not seek an alternative partner.

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The failure of the Franco-US alliance marks one of the largest merger breakdowns in history and up-ends expectations for an advertising industry that had been seeking to consolidate in response to the turmoil that companies such as Google and Facebook have wrought on their traditional business.

The planned deal had been mired in management infighting, regulatory trouble and tax issues. Both boards have agreed to terminate the proposed deal with no break-up fee.

'Level of uncertainty'

In a joint statement yesterday, Mr Lévy and Mr Wren said: “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.”

The termination shatters the two companies’ vision for a communications company that could set a “new standard” for the industry. The collapse will also be a personal blow to executives at both companies, who unveiled the deal with champagne toasts by the Arc de Triomphe nine months ago.

Mr Wren said the advertising group would have a bright future on its own: “We have stated from the very, very beginning that this was a proposed merger of opportunity, not necessity at any level.”

He estimated the collapse of the proposed union would cost the company about $60 million before taxes.– Copyright The Financial Times Limited 2014