• by John Capone , August 9, 2009

In a move that has been heavily speculated about, Publicis Groupe SA and Microsoft announced Sunday that they had come to an agreement over the acquisition of Razorfish by Publicis in a deal valued at about $530 million, to be paid in a combination of cash and Publicis stock. The deal brings Razorfish organizationally under VivaKi, the Publicis unit that has at its core a deepening of relationships between the company and media vendors.

"The acquisition of Razorfish is another step forward in realizing our strategic vision of building a world leader in digital communications -- a critically important space for our clients," said Maurice Lévy, chairman and chief executive officer of Publicis Groupe.

Microsoft acquired Razorfish in 2007 when it bought its parent, aQuantive, for $6 billion. The tech giant had been uneasy about owning an agency in direct competition with so many of its partners, and had been rumored to have put Razorfish on the block -- for a $600 million asking price -- as soon as it could make the sale this year without incurring any tax penalties. Although sources within WPP and Razorfish had said the rival holding company was also in the hunt, Publicis seemed like the most logical fit.

Razorfish will continue to operate under its own name, but organizationally will fall under the VivaKi umbrella, similar to Digitas. David Kenny, managing director of VivaKi, said: "We pursued this acquisition based on its potential to deliver client benefit. The addition of Razorfish to the VivaKi portfolio gives us a wider and more diverse platform of capabilities which will convert to optimal service offerings and other opportunities for our clients. Moreover, in collaboration with Microsoft, we will be able to develop and provide our clients exclusive, first mover access to new opportunities, programs, content, inventory and experiences."

In June, Microsoft and Publicis entered into a broad strategic alliance cooperation, and under the terms of the new deal this alliance will be deepened. Over the five-year term of the strategic alliance agreement between the companies, Publicis media agencies can purchase display and search advertising from Microsoft on favorable terms, in exchange for certain minimum guaranteed aggregate purchase levels. VivaKi has a similar deal with Google, incidentally, and shares a close relationship with the search giant.

Razorfish will continue to provide services to Microsoft for digital strategy, creative and experiential marketing, and has a commitment from Microsoft to spend a minimum amount on those services.

The deal is expected to be finalized in the fourth quarter, and is expected to be paid in a combination of cash and delivery of 6.5 million Publicis Groupe treasury shares. When the deal does close, Microsoft will own about 3% of Publicis.