Publicis Confirms Takeover of Bcom3; Other Agency Consolidations Likely

08 March 2002

Paris-headquartered Publicis Groupe on Thursday confirmed its acquisition of Bcom3 in a $3 billion (€3.42bn; £2.10bn) shares and cash deal [WAMN: 07-Mar-02]. Also as predicted yesterday, Japanese agency giant Dentsu is to invest $500 million (€568.7m; £351.2m) in a 15% holding in the combined venture.

Based on 2001 revenues logged by Publicis, the deal lifts the enlarged group to fourth position in the world agency league. Ranked in € billions, the latest lineup according to Publicis’ data is …:

1. Omnicom Group (6.9)
2. Interpublic Group (6.7)
3. WPP Group (5.8)
4. Publicis / Bcom3 (4.0)
5. Dentsu (2.2)
6. Havas (2.2)
7. Grey Global (1.2)
8. Cordiant (0.8)

Publicis revealed that 50% of the purchase price is to be raised by the issue of new shares and the balance via two sales of equity-linked bonds. The BCom3 name will vanish and layoffs are likely among the 38,000 staff jointly employed by both groups..

This is also a key deal for Dentsu which, although dominant in its own country with around 25% of the nation’s ad market, currently earns only 5% of its revenues outside Japan – and most of that from Asia. Its participation in Publicis / Bcom3 will greatly increase the global reach it can offer its Japanese clients.

Says Dentsu president Yutaka Narita: “Not only do we have the Bcom3 network in the US, but now we'll be able to use Publicis’ network in Europe. The world's advertising industry is rapidly reorganizing,” he added, “Dentsu had to move actively to respond to this globalization.”

The acquisition was much to the liking of the markets with Publicis shares soaring by 12% to €38.79. But as SG Stockbrokers’ media analyst Simon Baker observed: “The smaller agencies will find it that much harder to compete and it puts them under even greater pressure to consolidate.”

Arguably under the greatest pressure is London-based Cordiant Communications, parent of the Bates Group, and long the focus of merger rumours. Other prime candidates for consolidation are media buyer Aegis Group, Grey Global – and even Havas itself could be a target.

Meantime, Bcom3 is in talks with London hotshop Bartle Bogle Hegarty about buying the latter's minority stake in their joint media venture Starcom Motive Partnership. The sale would facilitate the merger of Starcom with its sibling MediaVest, in which Bcom3 has a majority holding. The sale would be equally beneficial to BBH, which would find the cash useful in funding its US expansion – a priority since its acquisition of Levi's $60 million US business in January.

Data sourced from: The Wall Street Journal Online, The Tomes Online (London) and Brand Republic (UK); additional content by WARC staff