Is it really a merger of equals? That’s a question that has dominated industry chatter about the proposed Publicis Omnicom merger since it was announced July 28.
Now one Omnicom Group shareholder has answered with a resounding no and is going to court to make his case. The shareholder, Paul Ansfield, filed a class-action suit in New York State Supreme Court Monday to stop the merger, contending that the terms are drastically unfair to owners of Omnicom stock. He alleged that the Omnicom board of directors breached its fiduciary duty by not maximizing the value of the merger to Omnicom shareholders.
More suits could follow. Last week Maryland-based securities litigation firm Brower Piven said it had launched an investigation into “possible breaches of fiduciary duty to current shareholders of Omnicom Group,” as well as into other unspecified violations of state law by the company’s board of directors in connection with the merger. The firm said it will explore whether shareholder value is maximized under the terms of the agreement.
Omnicom, which didn’t comment last week in response to the Brower Piven investigation did issue a response to the Ansfield suit: “Omnicom is aware of the complaint that has been filed in New York state court and we believe very strongly that the claims lack any merit whatsoever. The filing of lawsuits, like this one, shortly after the announcement of a merger or acquisition -- regardless of the merits of the transaction -- is a common occurrence.”
Ansfield’s suit was filed against Omnicom Group, Publicis Groupe, the proposed merger entity Publicis Omnicom Group N.V., Omnicom Group CEO John Wren and the other members of the Omnicom Board of Directors. Publicis was charged with “aiding and abetting such breaches of fiduciary duty” by Omnicom’s board. Publicis Groupe CEO Maurice Levy was not personally named as a defendant; nor were any members of Publicis Groupe board.
“Defendants have attempted to spin the proposed transaction as a ‘merger of equals’ even though Omnicom stockholders are being forced to give up much more for their portion of the combined company than Publicis shareholders are giving for their portion of the combined company,” the suit contends.
Ansfield argued that Publicis shareholders are getting a higher stake in the combined company even though Omnicom had “far higher” revenues than Publicis in 2012--$14.2 billion versus $8.5 billion. He also noted that Omnicom’s earnings before interest, taxes, depreciation and amortization, operating income, net income and free cash flow were all significantly higher than Publicis Groupe’s in 2012.
The suit contends that unless the court quashes the merger Omnicom shareholders will suffer “immediate and irreparable injury.”
Ansfield also cited a number of analyst reports attesting to Omnicom’s robust financial performance in recent years, which has been projected to continue without the need to execute a merger, let alone one that shortchanges Omnicom shareholders.