Publicis to Buy Bcom3 for $3 Billion

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In yet another advertising industry consolidation, France's Publicis Groupe SA has agreed to buy rival agency holding firm Bcom3 Group for $3 billion in stock and equity-linked securities, a deal that would create the world's fourth-largest ad conglomerate.


A joint statement issued yesterday said Publicis also has struck a long-term partnership with Japan's Dentsu Inc. to offer complementary marketing and advertising services in their respective markets.


The proposed merger comes less than a year after Interpublic Group of Companies Inc., New York, bought Chicago agency holding company True North Communications Inc. for $2.1 billion in stock.


The Bcom3 acquisition strengthens Publicis' position in the U.S. market, while the alliance with Dentsu gives the French firm a foothold in Japan, the world's second-largest advertising market.


"We become an extremely well-balanced company, with 49 percent of our revenues going forward generated from North America, 37 percent from Europe and 14 percent from Japan and the rest of the world," Maurice Levy, chairman/CEO of Publicis, said in a statement. "We're also enhancing our share in non-traditional creative services."


Publicis is the sixth-largest ad conglomerate worldwide before the merger, a position achieved through acquisition and organic growth. Bcom3 is the seventh-largest agency holding company. Last year, Publicis posted revenue of $2.1 billion and Bcom3 had revenue of $1.9 billion. Omnicom Group Inc., New York, remains the world's No. 1 agency holding company with 2001 revenue of $6.9 billion. Interpublic was No. 2 with $6.7 billion and WPP third, at $5.8 billion. Dentsu's revenue last year was $2.2 billion.


Once merged, Publicis will report revenue of $4 billion and boast 38,000 employees globally. It was unknown whether the merger would cost any jobs. Bcom3 will lose its name, and the new holding company's headquarters will be Paris. Publicis will rank first in Europe, third in the United States and boost its presence in Asia via the Dentsu alliance.


A privately held company, Bcom3 is 79 percent owned by its employees and the rest by Dentsu. The Japanese agency has had a strategic alliance with Bcom3 for the past two years.


Publicis gains agency brands like Leo Burnett Co., D'Arcy Masius Benton & Bowles, Bartle Bogle Hegarty, Manning Selvage & Lee and Starcom MediaVest. Major accounts include McDonald's Corp., Philip Morris Cos., Procter & Gamble Co., Diageo and General Motors Corp.


Publicis owns equally illustrious agency networks such as Fallon Worldwide, Saatchi & Saatchi, Publicis in Mid-America and Zenith Optimedia Group, which is owned 75 percent by Cordiant Communications Group and the rest by Publicis.


When combined, Starcom MediaVest and Zenith will become the world's second-largest media planning and buying group. Their combined billings are $36 billion, behind Interpublic's $39.5 billion. WPP recorded $35 billion in media billings and Omnicom $21.5 billion, according to Advertising Age.


In the statement, Publicis said all networks and units will be managed autonomously. But each agency in the Bcom3 roster will report directly to Roger A. Haupt, who will give up his position as chairman/CEO of Bcom3 for president and chief operating officer of Publicis.


Levy will continue as CEO of Publicis, functioning under a supervisory board chaired by Elisabeth Badinter, daughter of the company founder and a large shareholder.


Both Publicis and Bcom3 agencies offer services including advertising, direct marketing, interactive, public relations, promotions and event marketing.


The merger also will yield benefits in specialized services. In healthcare communications, Publicis hopes to combine the strengths of its Medicus Group with that of Bcom3's Nelson Communications. In public relations, Bcom3's Manning Selvage & Lee will support Publicis Consultants and Publicis Dialog.


Ethnic communications services also will be bolstered, with Burrell, Conill and Publicis Sanchez & Levitan gaining support from Bcom3's Bromley Communications, Lapiz, Vigilante, New-A and assorted Pangea companies.


And via Bcom3's Relay, Publicis will enter the sports and events marketing area.


Approval from Publicis and Bcom3 shareholders as well as the regulatory authorities in the respective countries is expected in June. Badinter and Somarel, a company associated with her, have already voted in favor of the merger. Dentsu and key shareholders of Bcom3 representing 31 percent of the outstanding shares also have said yes.


After the merger, Badinter would own 4 percent of the common shares of Publicis, Somarel 16 percent, Dentsu 15 percent, other former Bcom3 executives 14 percent and former Publicis executives 51 percent.


In terms of voting rights, Badinter would control 7 percent, Somarel 27 percent, Dentsu 13 percent, other Bcom3 executives 12 percent and former Publicis employees 41 percent.


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