One of the biggest merger in the advertising industry has been shut down on Thursday, May 8, nine months after it has been announced.
The $35 billion ‘merger of equals’ between Publicis Groupe and Omnicom Group, both having many of the most prominent ad networks in the world under their belt, faulted due to “difficulties in completing the transaction within a reasonable timeframe,” as an Omnicom statement put it.
A merger of Omnicom Group (market cap of $16.8 billion in last July) and Publicis Groupe ($15.6 billion) historically would have been the biggest agency deal, overshadowing Dentsu Inc’s $4.9 billion acquisition of the Aegis Group in March 2013 and WPP’s $4.7 billion purchase of Young & Rubicam in 2000.
“The parties have released each other from all obligations with respect to the proposed transaction and no termination fees will be payable by either party,” the statement adds. A $500 million termination fee would have applied if either company had walked away unilaterally.
According to Ad Age, other costs were also piling up, including Omnicom’s more than $48 million of pre-tax expenses into merger preparations. “I want to emphasise that, while the proposed merger was time consuming, we never took our eye off the ball in terms of what we needed to deliver for our clients, our people and our shareholders,” says Omnicom’s CEO, John Wren, in a statement. “And that has been reflected in our reported results. We’re bullish on 2014.”
“The decision to discontinue the process was neither pleasant nor an easy one to make, but it was a necessary one,” Publicis’ CEO, Maurice Levy, adds in a statement. “Prolonging the situation could have led to the diversion of the group’s management from its principle function: to best serve our clients.” The management board and the supervisory board of Publicis Groupe and the board of directors at Omnicom unanimously approved the split, according to both companies.
However, Wall Street never thought much of the deal, as their stocks never took off in the wake of the merger announcement. The stocks of both companies were hit, nevertheless, after the deal was called off. Omnicom shares fell to $1.80 from $64.4, while the shares of rivals, WPP and Interpublic Group of Cos, climbed by 8.7 per cent and 10.0 per cent, respectively, since Publicis and Omnicom announced their proposed merger last July.
Cultural differences were the reason cited by Wren in a press conference held on Friday, May 9. “We knew there would be differences in corporate cultures of Omnicom and Publicis. I think it’ll be a long time before I try to do a merger of equals again,” he said.