Publicis And Omnicom Call Off Their Merger


The largest proposed merger in Adland has been cancelled. Publicis Groupe and Omnicom today said that they have terminated their estimated $35 billion merger by mutual agreement, "in view of difficulties in completing the transaction within a reasonable timeframe."

The two companies said they have released each other from all obligations with respect to the proposed transaction, and no termination fees will be payable by either party. Under certain conditions, a $500 million termination fee could have been imposed if just one party called the deal off. 

The decision was unanimously approved by the Management Board and the Supervisory Board of Publicis Groupe and the Board of Directors of Omnicom.

The deal -- which had been looking less and less likely in recent weeks -- was formally terminated by Publicis Groupe and Omnicom late Thursday, well after the close of the U.S. and European stock exchanges. Omnicom is holding a conference with analysts and press tomorrow to discuss the breakup. 

The companies had proposed merging last July, but a variety of regulatory hurdles and disagreements between the two companies ranging from how to organize to who would be appointed to certain executive posts proved too much to overcome. For example both companies wanted their respective chief financial officers to take on the CFO post of the new company. There was also an unresolved debate about how to organize media and digtial operations and who would run them. 

The Wall Street Journal reported earlier that the companies continued to argue over which would be the acquiring company. Despite the positioning by the firms that the deal was a "merger of equals," technically one company had to acquire the other. 

Regulatory hurdles included obtaining certain tax concessions from France and receiving approval from the UK for exclusive tax residency in that country. China still had not approved the deal -- or least the companies have not acknowledged receiving approval if they did.  There were also law suits filed by Omnicom shareholders attempting to kill the deal. Those shareholders argued that they were not being fairly compensated under the terms of the agreement, given Omnicom's larger revenue and profit contributions to the merged entity. Now, those suits would appear to be moot. 

In a joint statement, Maurice Levy, chairman and chief executive officer of Publicis Groupe, and John Wren, president and chief executive officer of Omnicom Group, stated: "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. We, of course, remain competitors, but maintain a great respect for one another."

In a separate statement, Levy said: "The decision to discontinue the process was neither pleasant nor an easy one to make, but it was a necessary one. Prolonging the situation could have led to the diversion of the Group's management from its principle function: to best serve our clients. Our paths diverge today with mutual respect. Publicis Groupe will continue to pursue and accelerate the implementation of its ambitious strategic plan for 2018. I am very confident in our ability to successfully see this through and to achieve all our goals.”

 



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2 comments about "Publicis And Omnicom Call Off Their Merger".
  1. Michael E. Keenan from Keenan & Company , May 9, 2014 at 8:58 a.m.
    Another dinosaur canibalization ritual avoided, hooray for the employees, clients too. But not for long, a money-driven trend is inevitable when formerly privately held agencies go public and cede all to Wall Street demands.
  2. Henry Blaufox from DragonSearch , May 9, 2014 at 11:10 a.m.
    If French President Hollande had not proposed placing confiscatory tax burdens on successful wealthy individual citizens and French domiciled companies, would Monsieur Levy have considered the merger and attendant flight from French tax jusrisdiction in the first place? It seems noteworthy that the complex merger lost momentum as the French tax plan was rolled back.