Dentsu To Acquire Aegis For $3.85 Bil, Gives It A Digital 'Multiple'

Aegis Group, the London-based agency holding company that began as a Paris-based media-buying service, is about to become part of a Tokyo-based marketing services giant that will be one of the largest in the world. In a surprise deal announced during the wee hours, the board and key managers of Aegis agreed to be acquired by Dentsu in an offer valued at $3.85 billion.

The deal, which is expected to go through, represents a 48% premium over the value of Aegis’ shares, and would mark an end to incessant speculation about the future of the ad industry’s 6th-largest holding company (Aegis), which after merging with the 5th (Dentsu) would approach the scale of its 4th (Interpublic). For the past several years, speculation had focused on Aegis merging with the 7th, Paris-based Havas, because the two holding companies have a common major shareholder, French industrialist Vincent Bollore.

The companies described the offer as “good news” for Aegis’ clients, employees and shareholders, and noted that the valuation is more in line with the kind of multiples paid recently for digital media businesses -- the darlings of the industry’s M&A marketplace -- than those for traditional ad agencies or media companies.



The deal also comes as a feeding frenzy is mounting for big, scalable digital advertising agency organizations, following WPP’s recent acquisition of San Francisco-based AKQA, and a push by the biggest agency holding companies to scale for digital domination. The companies emphasized that the merger would create a “global leader in digital,” combining assets like Aegis’ Isobar network with key Dentsu digital assets such as 360i.

The companies will hold a briefing with journalists and investors later today to explain details of the deal, but the announcement indicated that the senior management of Aegis is expected to remain on board with what presumably would still continue to be called Dentsu -- a holding company that has had its own domestic struggles following Japan’s devastating earthquake and tsunami, but which also has been especially acquisitive in recent years, particularly in Western markets.

With the acquisition of Aegis, Dentsu gains scale and best-in-class resources in a number of critical and rapidly growing areas of the advertising business -- including Carat, one of the first and most highly regarded pure-play media services agencies, digital network Isobar, and global out-of-home media network Posterscope.

One of the questions that is likely to come up during today’s briefing with journalists and investors was the acquisition of a significant number of Aegis shares by two of its directors -- CEO Jerry Buhlmann and CFO Nick Priday -- days before Dentsu’s 48% premium offer was announced.

On Tuesday, Aegis said it was informed by the two directors on July 4th that Buhlmann had acquired 1,471 shares, bringing his Aegis shareholding to 532,705 shares and constituting 0.0454% of the company’s stock. Priday acquired 233 shares -- bringing his holding to 19,736 shares, or 0.00168% of Aegis’ stock.

The disclosure said the two directors acquired those shares “pursuant to a dividend reinvestment arrangement” and they acquired them as “ordinary shares of 5.5p each at a price of £1.6748 per share.” Dentsu’s offer represents a 48% premium on Aegis share price of 162p on 11 July.

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