British advertising group WPP has agreed to pay £729 million in an equal split of cash and shares to buy US-based Grey Global.
The much-anticipated deal to buy Grey Global, the world's seventh-largest global advertising firm, puts the combined company on par with ad industry leader Omnicom.
WPP clinched the auction for Grey after raising its initial bid, beating France's Havas and a joint offer from venture capital groups Hellman & Friedman and Kohlberg Kravis Roberts & Co.
The deal values Grey at £559.67 per share, from a closing price of £523.49 on Friday. Including Grey's £95.78 million in net cash, the deal will have a final price tag of £846m.
WPP will issue 82.2 million new shares, representing about 6.5 per cent of its enlarged issued share capital.
It said it expects the deal to add to earnings from 2005, and that it has already identified £11m in cost savings from the acquisition.
Grey Global chief executive Mr Ed Meyer, who owns a controlling stake in the company, has agreed to vote in favour of the deal and has signed a contract to stay on to at least the end of 2006.