Wren: POG Merger 'Most Likely' Delayed Until Q3
Omnicom CEO John Wren told analysts today that the completion of the company’s proposed merger with Publicis Groupe was taking longer than expected and now “most likely” will not be finalized until the third quarter of 2014. The company said it took a $13.3 million charge against earnings for the fourth quarter related to its proposed merger with Publicis Groupe and a $41.4 million charge for the full year.
When the companies originally announced the merger back in July of 2013 they were hopeful that it could be completed by the fourth quarter of that year or the first quarter of 2014. As 2013 progressed the companies acknowledged that some time by the end of the second quarter of this year was a more realistic time frame for the closing. Wren’s comments today mark the first time either party has suggested the delay could go into the third quarter.
The merger is “highly complex,” Wren told analysts, and is “taking longer than we originally anticipated” to work through. China is the only country remaining that needs give the two companies anti-trust approval. But then there are two other regulatory tracks to be hurdled including tax approvals and a green light from securities agencies. Both the U.S. Securities and Exchange Commission and the Netherlands Authority for the Financial Markets will scrutinize the deal after both companies have submitted their audited results for 2013. Wren said Omnicom would have its audited results ready by the end of this week.
Publicis Groupe announces its full year results on Thursday. It’s only after the regulators have signed off that shareholders from both companies will vote on whether to approve the merger or not.
Meanwhile the companies’ integration teams continue talk at length on the integration issues and what has to be accomplished the day the newly merged company goes into effect. It’s only later that a number of best practices may be adopted across the merged company, while it will take a year or longer for the companies to realize the $500 million in annual cost savings that will be achieved by operating as a single corporate entity.
Omnicom Group fourth quarter revenues were up 2.9% to $3.94 billion, while full year 2013 revenue was up 2.6% to $14.58 billion.
Organic revenue growth (which excludes the impact of acquisitions and currency fluctuations) was up 4.2% for the fourth quarter and 3.5% for the full year.
Net income for the fourth quarter was down 2.1% year to year to $300.5 million. Excluding the merger-related charge Omnicom said net income would have been up 2.6% to $589 million.
For the full year net income was down about 1% to $991.1. Excluding the full-year charge, net income would have been up 2.8% to $1.02 billion.
Wren described the company’s fourth quarter as “very solid” and that prospects for 2014 were positive. Company CFO Randall Weisenburger said the company currently expects 2014 organic growth to be in the 4% range.
Wren said the U.S. economy has shown “consistent forward momentum” throughout the past year. The company’s full-year North American organic growth was 3.7%. The company’s media and healthcare businesses were particularly strong, he said.
Many Asian and Latin American markets achieved double-digit growth in 2013. Western Europe continues to struggle but appears to have stabilized somewhat, Wren and Weisenburger
This story has been updated to include comments from Omnicom officials to Wall Street analysts during a Tuesday morning conference call.